The upcoming extraordinary Diet session is expected to debate a bill aimed at disposing 27.8 trillion yen in debts left behind by the Japanese National Railways — more than a decade after JNR was privatized.
But with the ruling Liberal Democratic Party’s setback in the July 12 Upper House election, swift passage of the controversial bill — which calls for the railways created by the privatization to shoulder an additional portion of the debts — may be difficult.
Government officials say they hope the bill clears the legislature in time for it to take effect Oct. 1, but some opposition parties have expressed dissatisfaction with the bill in its present form — a position that may have been boosted by the election results. “Realistically speaking, it will be difficult to pass the bill by the end of August,” a senior Transport Ministry official said. “I think the issue of (stabilizing) the financial system will be deliberated first because it will attract keen public attention both within and outside of the country.”
The ministry initially sought to have the bill passed during the previous Diet session, which ended in June, so it could start disposing of the debts beginning in October with ample time for paperwork. Although the government submitted the bill to the Diet in February and a special committee on the JNR debt issue and other related bills was set up in the Lower House, the panel met only once in May due to the tight schedules of its members.
When JNR, saddled with 37.1 trillion yen in debts, was privatized into seven Japan Railway group carriers in 1987, the Japanese National Railways Settlements Corp., a semipublic body, inherited 22.7 trillion yen worth of the debts as well as JNR’s assets, such as land and the JR group firms’ stock.
The JR group companies also bore the remaining portion of the debt.
Although JNR Settlements Corp. earned 8.1 trillion yen from selling assets and paid back part of the debt, the debt snowballed to 27.8 trillion yen because the corporation had to keep borrowing from private financial institutions and the state to make repayments.
The bill to be debated in the coming Diet session is designed to fully dispose of the 27.8 trillion yen in debts over a period of 60 years by dividing it into three categories — 15.2 trillion yen in loans with interest, 8.3 trillion yen worth of noninterest debt and 4.3 trillion yen in expenses related to pension payments for former JNR employees.
The third category is the most controversial.
Under the plan, the loans with interest and the noninterest debt currently held by JNR Settlements Corp. under a special account are to be transferred to the general account, which would combine them with the government’s other debts.
To repay the interest for the 23.5 trillion yen principal, the government plans to reduce the amount of interest by converting the existing loans into lower-interest loans and creating a special tobacco tax of 1 yen per cigarette. It also plans to transfer 1 trillion yen from the postal savings special account. The revenues from the tobacco tax and money secured by adjusting the outlays and revenues of the general account will be used to defray the principal portion of the debt.
As for the remaining 4.3 trillion yen related to pensions for former JNR employees, the Japan Railway Construction Public Corp. — which is to take over JNR Settlements Corp. as of Oct. 1 — is to repay the cost with government subsidies and revenues gained from selling inherited assets. The point of contention surrounding the bill lies in the firm rejection by seven JR group companies against the burden-sharing of 360 billion yen out of the 4.3 trillion yen pension costs on grounds that they have already made similar payments.
In 1996, to make up for a 940 billion yen shortage in reserves for the JNR employee pension program, the Cabinet decided that JNR Settlements Corp. should bear 770 billion yen and the JR group firms should shoulder the remaining 170 billion yen.
The money was needed when the Employees’ Pension Insurance Program absorbed the pension programs for JNR employees last year, and the JR group firms had already paid.
Under the repayment scheme outlined in the current bill, the JR firms are to bear 360 billion yen, which is part of the 770 billion yen initially set to be shouldered by JNR Settlements Corp., to cover current JR employees’ pension payments from their JNR employment period.
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