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The government is afraid to apply its “bridge bank” scheme to the nation’s 19 major banks because any moves to aid one of them would trigger speculation more collapses are on the way and destabilize international markets, Finance Minister Kiichi Miyazawa indicated Monday.

Speaking to the Lower House Budget Committee’s first meeting of the extraordinary Diet session, Miyazawa told Naoto Kan, president of the largest opposition force Democratic Party of Japan, that new measures may be needed should major banks fail.

However, Miyazawa insisted that the bridge bank plan can, in principle, be applied to any financial institution.

Bank of Japan Gov. Masaru Hayami also seemed reluctant to use the bridge bank scheme on major banks. Hayami said the failure of a major Japanese bank should be prevented, and that troubled institutions should be merged with healthy ones to minimize the impact on the overall financial system should such an event occur. “I have strong concerns that the impact of a sudden failure of a major bank on the international financial system will be enormous,” Hayami said. “It would be desirable that weak institutions be merged with stronger ones.”

Hayami also said he is unsure whether the bridge bank scheme should apply to major banks because of the potential chaos it may trigger in international financial markets. Meanwhile, Prime Minister Keizo Obuchi, reiterating his pledge to revive the economy, searched for cooperation in the opposition camp to quickly pass six crucial bills to stabilize the financial system.

Speaking before the Lower House Budget Committee, Obuchi said the bad loan problem was the most pressing issue in Japan today. “Without the smooth disposal of those bad loans, the future of our nation is in danger,” he said. “I believe that this perception is shared by the opposition parties.”

Earlier this month, the government and the ruling Liberal Democratic Party submitted to the Diet the six bills that would implement the “bridge bank” system and other schemes designed to liquidate failed banks without hurting depositors and healthy borrowers.

In a move to counter such proposals, however, the DPJ, Shinto Heiwa (New Peace Party) and the Liberal Party are slated to hold talks today to jointly draw up their own bills for stabilizing the financial system.

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