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Japan subprime fears could become reality

Japan subprime fears could become reality article image

The Tokyo Foundation has warned that Japan could face a subprime crisis as the world's second largest economy buckles under its declining exports and sluggish domestic economy. The foundation expects financial problems and housing loan defaults to follow. A decade ago, following the Asian financial crisis, the government waived the 20 percent deposit usually required to secure a loan and set the interest rate at two percent to encourage borrowers, a rate that was set to double after 10 years when the government thought the economy would recover. The current financial crisis will compound the problems for borrowers who were unsuitable for the loans in the first place, agrees Osamu Nagashima, spokesperson for the Sakura Jimusho housing consultancy. The government's Japan Housing and Finance Agency, which carries approximately 20 percent of domestic housing loans valued at about US$2.3 trillion, will the be the single greatest body affected.

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