While banks in the U.S. and Europe are writing down billions of dollars in subprime losses, Japanese banks have been surprisingly stable. Japan's banking industry, hammered by the collapse of the nation's real estate bubble in the early 1990s, have not reported gigantic losses related to the collapse of the American real estate bubble of the mid-2000s. That's prompted some analysts to ask, Is it possible Japan's banks really do have relatively little exposure to the subprime tsunami that is wiping out billions in earnings at the likes of UBS (UBS), Merrill Lynch (MER), and Citigroup (C)?
Chief among the skeptics is Hans Redeker, currency chief at BNP Paribas (BNPP.PA). In a research note to clients early this month, he warned that Japan may be hiding billions of dollars in subprime losses that so far no one has admitted to owning. His argument is simple: Japan, as the world's largest creditor nation, plays a central role in pumping global liquidity, aided by its ultra-low interest rates. But its biggest banks, which include "megabanks" Mitsubishi UFJ Financial Group (MTU), Mizuho Financial Group (MFG), and Sumitomo Mitsui Financial Group (8316.T), have admitted to only $5 billion or so of subprime-related losses, a remarkably small figure considering the losses at American and European banks already run to more than $130 billion.