Double-loan bailout systems for companies and people affected by the March 2011 earthquake and tsunami need a full review because conflicts among operators may be dampening reconstruction efforts, Tohoku residents and critics say.
Two and a half years since the tsunami devastated parts of the Tohoku region’s coast, these people say the easy double-loan problems have already been dealt with and that the competition for new clients between operators of the bailout systems is creating unneeded friction.
Double loans refer to loans taken out by people or companies to rebuild their homes or other property and replace business equipment — while still having to repay loans taken out before the disasters.
An estimated 200,000 homes were destroyed by the magnitude 9 temblor and subsequent tsunami on March 11, 2011. Housing loans are believed to remain on about 8,000 to 10,000 of the destroyed homes.
Under the bailout systems, partial or full waivers are obtained on obligations on loans made before the disaster.
For corporate debtors, there are two types of bailout organizations. One is a group of regional bodies set up in five of the disaster-hit prefectures by the previous administration led by the Democratic Party of Japan.
The other is a special corporation created under a law sponsored by lawmakers mainly from the Liberal Democratic Party back when it was the largest opposition party.
The regional bodies and the LDP-backed corporation “are on very bad terms” with each other, apparently due to political reasons, a government official said.
The two sides have been rivals in recruiting personnel and winning clients. Municipalities and financial institutions in the disaster areas often find themselves caught between requests from both sides to introduce new clients.
“It would be easier to make explanations to potential corporate users if the two types were combined,” said an official of a small financial institution in Miyagi Prefecture, one of the five heavily affected prefectures.
In response to such calls, the central government is considering integrating the two sides into a single entity. Redundant operations would be scrapped and the integrated body would be more efficient, officials say.
For individuals struggling with double loans, the central government has set debt reorganization guidelines to avoid bankruptcies.
Banks will partly or entirely give up their claims on housing and automobile loans if borrowers in disaster areas work out appropriate repayment plans under the guidelines.
But the guidelines recently drew strong criticism from a local bar association, which accused an independent panel that promotes the system of improperly forcing bailout applicants to promise to repay a portion of their loans.
The criticism pitted the bar association against the panel. Although the panel later agreed to stop the practice, the two sides have not fully ended their acrimony.
Some members of the bar association have demanded that they be allowed to attend panel meetings to screen bailout applications. The panel has rejected this request.
Municipal officials in disaster areas say residents are hesitant about using the bailout systems because public understanding is low.
In Kesennuma, Miyagi Prefecture, chamber of commerce executive Toshiharu Kasuga meanwhile said seminars in rural areas attract few participants, apparently due to concerns about looking bad.
He said efforts should be made to make direct contact with prospective users rather than trying to bring together potential applicants in a public place.