Going Bust

The beginning of summer is customarily the season of the Hollywood blockbuster, but last week Japan's sickly banking sector produced one of its own. Resona Holdings, Japan's fifth largest bank, declared it no longer had the capital to meet regulatory requirements and was asking the government for a massive $17.2 billion bailout—which could effectively lead to a nationalization of the bank. Resona's president Yasuhisa Katsuta also announced his resignation.

A meltdown of one of the country's top lenders has long been expected given Japan's chronic economic problems, and Resona's plight will only add to fears that the worst is yet to come. Curiously, however, the bank's bailout request may be something of a victory for Prime Minister Junichiro Koizumi's much-maligned financial-services czar, Heizo Takenaka. A Harvard-trained economist, Takenaka took up his current post last fall, vowing to clean up the banking sector, but powerful politicians thwarted his initial reforms. Takenaka retreated, seemingly having made yet another false start in Japan's halfhearted reform attempts. But like The Matrix, he reloaded. Takenaka toned down his approach and last winter pushed through accounting reforms aimed at closing some of the banking industry's favorite loopholes for inflating their capital bases—which is why Resona had to ask for help. And since the bases at Japan's other major banks are also dwindling thanks to a relentlessly falling stock market, the Resona saga may soon have a sequel.