Japanese consumers will be limited in the amount they can borrow next year
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Japanese consumer finance company Aiful has avoided potential bankruptcy after receiving approval from its creditors to delay debt repayments. The firm said it had met with 65 of its creditors, who agreed to delay a total of 290bn yen ($3.2bn; £2bn) of loan payments. Shares in the company jumped almost 9% on the news. While the debt rescheduling throws Aiful a lifeline, analysts said the outlook for the firm was bleak. "Consumer finance firms [not affiliated with banks] lack the financial flexibility to face their big challenges - elevated levels of interest repayment, and shrinking earnings assets and lower interest spreads," said Ehsan Syed at Fitch Ratings in Tokyo. Aiful, like many other Japanese consumer lenders, has been hit hard by tighter lending regulations introduced in 2006. These reduced the maximum interest that can be charged on loans. And a new rule to be introduced next, which limits the amount of money consumers can borrow, could make matters even worse, analysts said.
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