The attacks on America and their effect on financial confidence have exacerbated an already grim situation at Japan's commercial banks. The country's worsening economy means that more companies will go bust, adding to the banks' huge pile of bad loans. Falling stockmarkets mean that Japan's biggest banks are sitting on ¥5 trillion ($42 billion) or so of paper losses on equity holdings. These losses must be subtracted from banks' capital at the end of September, when books close for the first half of the financial year. The Bank of Japan's cut in its discount rate this week may have been aimed as much at helping the banks through this period as at supporting other central banks' easing.
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