Japan's banks slash jobs

The government wants banks to get tough on debt

Japan's biggest banks are to cut at least 10,500 jobs to comply with a government plan to strengthen the financial sector, the country's financial watchdog has said.

Mizuho, the world's biggest bank by assets, is to scrap nearly 4,000 jobs, equal to 14% of its workforce, over the next two years, the Financial Services Agency (FSA) said.

Sumitomo Mitsui Financial Group (SMFG) will also cut 14% of its staff, about 3,500 jobs, while UFJ Holdings will shed 3,000 staff, or 12%.

They are among 15 banks that the FSA ordered to produce plans to strengthen their balance sheets in order to continue to receive public funds.

Soft on debt

The FSA announced the job cuts, along with other compliance measures such as revised profit forecasts.

Japan's banking sector is weighed down with bad loans, which the government has estimated at about 50 trillion yen ($407bn; £258bn), though independent analysts think the total burden could be much higher.

The overall quality of the banks' assets is also poor because of their habit of buying assets off struggling clients to keep those firms afloat rather than calling in the receivers.

The government of Prime Minister Junichiro Koizumi has demanded that the sector reform itself.

The FSA said Mizuho has cut its earnings forecast for the 12 months to March 2004.

Mizuho now expects to report net profits of 200bn yen instead of 212bn as previously forecast.

SMFG has left its profit forecast unchanged at 100bn yen, while UFJ raised its expectations slightly to 135bn yen.