In addition, Cerberus is the majority owner of Aozora Bank (the former Nippon Fudoson Bank).

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What is more, Aozora itself probably has many non-performing loans on its books.

ECONOMIST: A curious proposal by one of Japan's biggest banks

Locals, such as Mizuho Corporate Bank and Aozora Bank, are also making loans.

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By offering to take on Aozora, Sumitomo Mitsui might be calculating that it is building up political, not financial, capital.

ECONOMIST: A curious proposal by one of Japan's biggest banks

An American investment fund, Cerberus, is also interested in Aozora.

ECONOMIST: A curious proposal by one of Japan's biggest banks

Last month the country was shocked by the death of Tadayo Honma, a former central bank governor who'd become the CEO of Aozora Bank, successor to the shuttered Nippon Credit Bank.

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