The Tokyo financial markets were shaken yesterday by allegations in the Japanese newspaper Nihon Keizai Shimbun that UFJ had deliberately concealed the extent of its non-performing loan book from the Financial Services Agency (FSA). It is alleged by the newspaper that the management of the bank stored documents in a locked room that the FSA knew nothing about until it received an anonymous tip-off.
UFJ denied the report and the FSA refused to comment, but the story prompted substantial falls in the share prices of all Japanese banks, including Mizuho, Sumitomo Mitsui and Bank of Tokyo Mitsubishi, as well as UFJ. It brought to an end a nine month rally in Japanese bank shares, and fed as yet unsubstantiated concerns that the Japanese banks are in worse financial shape that is officially admitted.