Japanese Shipowners in Rough Waters

Not too long ago, Japanese shipowners were able to secure cheap financing at 90% financing or even 100% financing from the Japanese banks so long they have a long-term charter with one of three mega carriers. But this is no longer the case today when Japanese banks continue to grow cautious and tighten their lending capacities towards the domestic shipping industry.

During the bankers’ panel discussion at Marine Money’s 4th Annual Japan Ship Finance Forum, Mr. Yohei Ugari, general manager of the ship finance department at SMBC, shared with the audience that Japanese mega banks are no different from their Western counterparts and are constrained by their capital-adequacy ratios. At the same time, Japanese shipowners are facing their own set of challenges especially in generating stable cash flows due to the significant appreciation of yen over the past few months. Traditionally, shipowners in Japan are highly leveraged and have enjoyed the low interest yen denominated loans. But it is also this preference for yen denominated loans that exposes them to considerable exchange rate risks, arising from the mismatch in currencies between revenue and expenses.

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