Japanese insurer Yamato Life collapses

This the financial failures are just confined to the US and Europe. The cloud has spread to Japan, sucking in Japense insurer Yamato Life.

This the financial failures are just confined to the US and Europe.  The cloud has spread to Japan, sucking in Japense insurer Yamato Life. 

Yamato life is a medium-sized insurer in Japan and it used aggressive investing to try and cover up its losses as an insurance company.  The Financial Times writes that:

“Yamato Life wasn’t really doing well as a life insurance company so they made up for it through investing,” said one Tokyo analyst.

As the value of its investments plunged, the company attempted to shore up its capital by raising funds from third parties but “the credit contraction spread far more rapidly than expected,” Takeo Nakazono, president of Yamato Life said.

Government officials tried to portray the bankruptcy as a special case. Yamato Life’s failure “is the result mainly of the company’s unique business model, whereby it covered its high operational costs with returns from investing in securities”, Shoichi Nakagawa, minister of financial services, said."

 

Yet, other believe that the insurer's failure is just the tip of the iceberg.  Like their American counterparts, many Japanese banks bought securitized products based on the value of real estate.

The analyst went on to say:

"Many Japanese banks and other financial institutions bought securitisation products which are plunging in value and the question is how much they bought and whether or not they have sufficient capital to cover their losses, she said."

Most of Japan's large banks are well capitalized and should be okay but there are many regional banks that could collapse of the problems persist.  There are also other investment vehicles in the country that could come under heavy pressure.  Recently Japan's first real estate investment trust New City Residence Investment went under due to difficulty in raising capital.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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