Disposal of bad loans to dump the key players of Japan's economy? -- Akahata editorial, June 17, 2001 (Excerpts)

There is a widespread concern about the Koizumi Cabinet's call for the write-offs of bad loans held by major banks to be carried out as a priority task in its "structural reforms." There is concern that the measure will end up in massive bankruptcies of small- and medium-sized enterprises.

Small- and medium-sized enterprises are the mainstay of the economy. They account for 99 percent of all enterprises, and employ 70 percent of the nation's workforce.

Present bad loans held by the banks are mostly loans for small- and medium-sized enterprises. The prolonged economic recession caused a decline in sales and increased deficits. The thing is not the inefficiency of their business operations as the government claims: government economic policy is the main problem.

If banks suspend loans to these businesses and collect outstanding loans and collateral, borrowers will inevitably go bankrupt. There is an estimate that 200,000 to 300,000 small- and medium-sized enterprises will go bankrupt if the 16 major banks write off their bad loans. The average number of annual business failure is 19,000. So what has been spread out over the last 10 years will happen just in one year.

At a time when smaller businesses are facing the biggest ever difficulty, the government has no intention of helping them; it is trying instead to abandon them in the name of "structural reforms." If such a policy is actually carried out, it will adversely affect the business of these enterprises, the living conditions of their employees, and the whole Japanese economy. An increase in bankruptcy and unemployment will make the economic situation worse, and bad loans will bulge.

Recently, economic experts began to criticize the government policy of allowing banks to write off bad loans, saying it is "the worst of policies for the worst of times."

The most appropriate and necessary policy for helping small- and medium-sized enterprises, the key player of Japan's economy, is to reduce the consumption tax to boost domestic demand and personal consumption. This will also lead to the settlement of the question of bad loans. (end)