Japan banks should reduce stockholdings - Bank lobby

Japan's banks should consider reducing their hefty stock portfolios in the future, as the market downturn has eroded earnings, the head of its banking lobby.

Japan's banks should consider reducing their hefty stock portfolios in the future, as the market downturn has eroded earnings, the head of its banking lobby said on Tuesday.

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However, the industry group currently has no plans to ask the Bank of Japan to buy some of the shares held by lenders, said Seiji Sugiyama, the head of the Japan Bankers Association.

Domestic banks generally take big stakes in corporate clients as a way to cement business ties, and the recent sharp decline in stock prices has weighed on their earnings.

"I personally think we need to lower (stockholdings) somewhat," said Seiji Sugiyama, who also heads the retail arm of Mizuho Financial Group, Japan's second-largest lender.

Once thought to be relatively shielded from the global credit crisis, Japanese banks have recently joined the scramble to raise cash.

Mitsubishi UFJ Financial Group, the country's biggest bank, posted a 61 per cent drop in quarterly profit this month and has said it will raise more than $10 billion to replenish capital depleted by the stock market plunge and an investment in Morgan Stanley.