Japanese Lenders Soar on Prospect of Osaka's New Special Business Zone

Japanese yen
Japanese yen

In Asia Monday, Japan's Nikkei 225 Index advanced 0.7% to close at 9,267. In Hong Kong the Hang Seng lost 0.3% to close at 19,842 and in China the Shanghai Composite Index fell 0.8% to 2,364.

Shares in Japanese consumer lenders surged on the news that plans are in the works for Osaka to become a special business zone. This would make it exempt from the heavy regulations that have strangled Japanese lenders with restrictions such as limiting the amount a consumer can borrow to one third of his annual income and capping interest rates at 20%.

According to Bloomberg BusinessWeek, if the proposal goes through Osaka lenders could charge as much as 29.2% interest on loans to small businesses, and could loan out larger amounts of money. According to Japan Today, Osaka governor Toro Hashimoto is banking on the plan attracting business and investment from all over Asia.

Governor Hashimoto made his name as a TV celebrity. A fully qualified lawyer, he became a household name in Japan after appearing regularly on a national television show called "The Legal Advisory Office that People Queue Up For," where he dispensed advice to people seeking marital and financial help. He also took part in popular TV quiz shows. Elected governor at 38, he's the youngest ever Japanese governor and has vowed to inject new energy into his region.

According to Nomura's estimates, Japan's top four consumer lenders could lose $5.7 billion over the next two years, says Bloomberg BusinessWeek, after already losing 2.3 trillion yen since April 2006. With high hopes pinned on Osaka's proposal, Acom skyrocketed 26.2%, Aiful surged 23.9%, Takefuji climbed 17.8% and Promise leaped 17.1%. Other consumer credit companies such as Credit Saison gained 9%.

In other sectors, a decline in the yen against the euro sent shares in electronics exporters rising. Casio Computer jumped 4.1%, Clarion, which makes sound systems for cars, gained 3.7% and Sanyo rose 3.5%. Sony, the maker of the PS3 game console was up 0.9% while rival Nintendo dropped 0.5%.

In Hong Kong, home sales dropped to their lowest level in more than a year with Bloomberg reporting that June residential sales declined to 9,130 - nearly 2,000 fewer than the previous month. China Resource Land tumbled 2.7%, Agile Property slumped 2.6%, China Overseas Land fell 1.9% and Sino Land declined 1%. Cheung Kong rose 0.6%.

Bank of China slid 1.3% in Hong Kong after an announcement that it will sell shares to raise funds. China Construction Bank lost 1% and HSBC closed 0.8% lower.

In China, fear of an economic slowdown sent shares in shipping companies lower. Cosco Shipping slid 2.3%, China Shipping Container Lines declined 1.8%, China Cosco lost 1.4%, and China Shipping Development dipped 0.9%.

SAIC Motor, lost 0.6% today, stung by a report saying car sales throughout China have slowed. In June, Chinese car purchases were less than half of what they were in April or May. Beiqi Foton Motor slid 1.6% in today's trading while Tianjin Faw Xiali rose 1.8%. Even in China, uneasiness over the economy is putting a damper on major shopping sprees.