Japan takes sub-prime hit

Japanese financial institutions lost as much as $2.1 billion from investments related to risky U.S. housing loans in the first half of the current fiscal year, according to a government estimate published by Japanese newspapers Friday.

For the six months ended Sept. 30, the losses accounted for about 17% of a combined $11.9 billion in securitized holdings that included the so-called sub-prime loans, according to the Nikkei, one of the newspapers reporting the Financial Services Agency estimate.

The agency said in its Thursday report that the U.S. sub-prime problems had had a limited effect on Japanese financial institutions. But the losses could expand because of the resulting market turmoil, which has been churning since last month, the Nikkei said.

Agency officials were not available for comment Friday, a national holiday.

The damage estimate from the problems in the U.S. mortgage market is the first by a Japanese financial authority. The report is based on a survey of 576 Japanese financial institutions, including the nation’s top 10 banking groups, the Yomiuri newspaper said.

Most of the damage came from the major Japanese banks.

Japan’s leading six banking groups are expected to face at least $2.75 billion in combined losses on their investments involving assets based on risky loans in the U.S. housing market, the Nikkei said.