Update On Japan´s Debt Repayment Moratorium

Originally published October 9, 2009

● No mandatory moratorium - Lender's consent will be required.

● Debt subject to moratorium will be guaranteed by the government.

A moratorium on debt repayments by individuals and small business owners has been advocated by Shizuka Kamei, Japan's financial services minister, since he took office in mid-September. Kamei's proposal to exempt debtors from repaying the principal and accrued interest on loans sent shockwaves through Japan's financial services sectors. According to the press reports on October 9, 2009, however, the moratorium will likely be legislated in a more modest form and will not be mandatory. The debt moratorium, however, is expected to put additional burden on Japan's already heavily indebted government and may create moral hazard problems.