Japanese Banking Giant Caught in the Crossfire

Court documents disclosed this week revealed that Katsumi, a joint venture between Norinchukin Bank and Mitsui & Co., had a staggering $1.75 billion in exposure to this incident. This is currently the largest amount among the disclosed creditors, with the second highest being a fund under Jefferies Financial Group, which invested $715 million in First Brands Group's accounts receivable bonds.

According to the court documents, Charles Kelly, the attorney for Katsumi, stated to the Texas court that the company participated in the acquisition of hundreds of thousands of accounts receivable as a buyer's representative. When First Brands Group filed for bankruptcy in September, Katsumi held approximately 210,000 unpaid accounts receivable, with a total value of about $1.75 billion (approximately RMB 12.47 billion), averaging around $9,000 per transaction.

Norinchukin Bank, established in 1923, is one of Japan's largest institutional investors and the primary institution engaged in agricultural cooperative financial activities in Japan. Its funds mainly come from member bank deposits. Since the 1970s, with the significant growth in savings deposits from member banks, Norinchukin Bank has diversified its investments on the asset side. In the late 1990s, its investment scope further expanded to global financial markets.

Earlier this year, the company disclosed in its annual report for the period ending in March that it recorded a massive loss of ¥1.8 trillion (approximately $11.7 billion or RMB 84 billion) for the fiscal year due to investments in overseas bonds such as U.S. Treasury bonds. The company also stated that it had an unrealized loss of ¥1.24 trillion on its bond holdings.

Taro Kitabayashi, Chairman of Norinchukin Bank, stated that the concentrated sell-off of U.S. Treasury bonds implemented due to investment failures had concluded in the 2024 fiscal year. As the bank sold over ¥10 trillion in low-yield assets in the previous fiscal year, its profitability is improving. He mentioned that Norinchukin Bank will advance investment reforms in the medium to long term, re-evaluating the bond-centric international diversified investment model to achieve genuine diversification.