Japan's banks slide on failure warning

In late October, the government unveiled its programme for sorting out the multi-trillion yen loan burden which is blocking fresh lending and exacerbating persistent deflation.

At the time, its architect, financial services and economy minister Heizo Takenaka, was criticised for watering the plan down.

But according to the Financial Times, Hiroshi Okuda, head of business lobby group Keidanren, has said that even in its present state the plan will leave the top four banks in a "fragile" state.

The banks may have to be renationalised before the year is out, the Times reported.

In response, investors sold banking shares, forcing stock in UFJ, the smallest of Japan's "big four" banks, down 12.88% - the maximum allowed under Tokyo Stock Exchange rules - to a new all-time low of 112,000 yen.

Mizuho, the biggest bank in the world by assets, slid almost 9%.

In trouble

The FT said that Mr Okuda, who heads the Keidanren business federation, believes the government's plans would mean the capital held by the big four fell short of international requirements.

That might lead to an injection of public funds.

The Times went still further, saying that Mr Okuda warned of impending nationalisation of at least one, presumed to be UFJ.

The bank loaned huge amounts of money to failed retailer Daiei, among other high-profile clients.

The Keidanren denied the Times' report, although it said the FT's was accurate.