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The Democratic Party of Japan and Shinto Heiwa (New Peace Party) are expected to jointly draft their own legislation to deal with the nation’s teetering financial system to counter bills submitted to the Diet by the government and the ruling Liberal Democratic Party.

The Liberal Party had also been involved in talks with the DPJ and Shinto Heiwa but had different ideas on how to deal with bank failures, and an impasse was declared during working-level discussions Wednesday.

DPJ and Shinto Heiwa executives had agreed Tuesday night they would go ahead and draft the bills whether or not the Liberal Party compromised at Wednesday’s meeting, party sources said.

The Liberal Party wants all insolvent banks to be subject to liquidation; the DPJ and Shinto Heiwa think major banks should be nationalized to mitigate negative effects on the financial system.

The two parties will attempt to work out details by the by the end of this month, party sources said. The basic points the two parties have agreed on so far include:

1) the formation of a quasijudicial body independent of the Finance Ministry to address financial failures;

2) forced disclosure of data on nonperforming loans held by financial institutions;

3) clarification of responsibility regarding the management of banks and protection of depositors.

Although the government and LDP executives have expressed a willingness to compromise on the final drafts given their lack of power in the Upper House, whether they will actually do so remains to be seen.

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