Japan banks on CEE

As Japan's economy continues its recovery, the country's banks, which have made progress in disposing of nonperforming loans, are shifting their focus back to increasing overseas loans. The lenders see Central and Eastern Europe (CEE) and Russia as critical markets in their push outward, and major players are rushing in to establish branches in CEE and Russia, on expectations the region's economic growth will provide ample lending opportunities.

The number of Japanese manufacturers operating in the region has rocketed in the last years. According to the Japan External Trade Organization, the number of producers from Japan in Central and Eastern Europe increased by 70 percent from three years ago to 160 firms at the end of 2004. There were 116 Japanese companies operating in Russia as of March 31, roughly double the figure from two years ago.

In an attempt to cater to their needs, Bank of Tokyo-Mitsubishi has announced plans to open a branch in Prague, Czech Republic in spring 2006.  The existing representative's office, responsible collecting information and data, will be upgraded into a commercial banking branch that will handle loans, deposits and foreign exchange.

In June Sumitomo Mitsui Banking Corporation (SMBC), a unit of Sumitomo Mitsui Financial Group, set up a special division at its London branch that focuses on loans to Central and Eastern Europe.  The division's employees will travel to Poland, the Czech Republic and other countries in the area.

Major banks are also looking for business opportunities in Russia. SMBC plans to upgrade its representatives' office into a local subsidiary. Bank of Tokyo-Mitsubishi also intends to set up a local unit in Moscow as early as spring 2006 to handle local banking services. Also, Mizuho Corporate Bank is considering setting up shop in Moscow as early as next year. (Reuters)