Government chooses the wrong one to care about -- Akahata editorial, January 10, 2002

The ruling Liberal Democratic, Komei, and Conservative parties, the government, and business circles are calling for public money to be again used to save major banks.

Prime Minister Koizumi Jun'ichiro has also repeatedly made remarks on the premise that further public money injection into banks is necessary. At the new year press conference he said that the government is preparing to take bold and flexible measures to prevent unnecessary financial confusion from occurring.

Who is responsible for 'confusion'?

Prime Minister Koizumi's explanation is tantamount to describing how daring the government is in dealing with something unexpected in the financial situation. But the question is, who is responsible for causing the unnecessary "confusion"?

The Koizumi Cabinet is. It is forcing financial institutions to dispose of bad loans in a fixed time frame of two or three years.

The early disposal of bad loans is what the Koizumi "reform" calls for as a priority task, but it will push many companies with financial difficulty amid the economic recession into going bankrupt in order to ensure major banks higher profitability.

The rapid increase in non-performing loans was triggered by the increasingly serious economic situation. Many companies have cash-flow problems due to a slump in sales and are unable to repay their loans, and the loans are labeled as "bad." Unless a complete turn-around takes place, bad loans will continue to increase as is clearly shown in banks' financial statements.

Far from trying to eliminate the cause of bad loans, the Koizumi Cabinet is encouraging banks to dispose of bad loans as quickly as possible. This will only increase corporate failures and unemployment, thus exacerbating the economy. In particular, local economies are the hardest hit by this policy.

Under the government policy of immediately disposing of bad loans, the Financial Services Agency mechanically apply financial inspection guidelines to be used by major internationally operating banks and local credit unions and associations. This requires credit unions and associations to build up their allowance for bad debts to many times what they had before, which caused these credit unions to go bankrupt.

In 2001, 46 credit unions and regional banks went insolvent, mostly in November and December. This will worsen the business situation.

The government policy of increasing the people's share of burdens in the social services and encouraging large corporations to carry out restructuring and personnel dismissals are accelerating bankruptcies.

As a result, bad debts increased, far from decreasing as anticipated. The increased cost for disposing of the bad loans became a pressure on bank management. The government will again use public funds to help improve these banks' capital assets.

On the other hand, the government is to cap the deposit guarantee from April.

In the name of "structural reform," the government urged major banks to write off bad loans. After the write-off drive caused a lot of trouble, the government is to use tax money to get major banks out of trouble by making the people's deposit unprotected. By this the people are doubly insulted.

Need is to recover domestic demand

Financial institutions cannot remain unaffected by the major economic recession in Japan. The Koizumi "reform," which does not care about economic recovery, will lead to a vicious circle of an increase in bad loans and further public funds to make up for them.

The people's livelihood is in need of public help. The government must drastically change its upside-down policy of helping major banks with public funds and adding difficulty to the people's livelihood. A change in economic policy toward helping the household economy and recover domestic demand is essential for settling the bad loan question. (end)