A government-proposed bill to create a new state agency to supervise financial institutions cleared the Lower House on May 29 with support from the ruling Liberal Democratic Party, its two non-Cabinet allies and other small parliamentary groups.

Major opposition forces such as Shinshinto, the Democratic Party of Japan and the Japanese Communist Party voted against the bill, which was immediately sent to the Upper House. It is expected to clear the Diet and be enacted into law by June 18, when the current session is scheduled to end.

The agency, which would be set up under the Prime Minister’s Office, would be in charge of inspection and supervision of financial institutions by taking over such tasks from the Finance Ministry. The creation of the new watchdog body, which will be independent from the Finance Ministry, is intended to reform the powerful ministry in the wake of its failure to properly deal with the “jusen” mess concerning several housing loan companies and a series of money-related scandals involving elite ministry bureaucrats. The Finance Ministry has been criticized for what is called its excessively wide scope of discretionary power to deal with everything related to finance.

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