The government and the Liberal Democratic Party reached basic agreement with opposition parties Friday on key financial stabilization bills, clearing a major hurdle before Prime Minister Keizo Obuchi’s upcoming trip to the United States.
Obuchi, who is set to meet with U.S. President Bill Clinton next Tuesday, held separate talks with the leaders of four opposition parties — the Democratic Party of Japan, the Heiwa-Kaikaku parliamentary group, the Liberal Party and the Social Democratic Party — in last-ditch efforts to strike a deal before his departure Sunday.
All of the four opposition parties except the Liberal Party said they have cleared major points of dispute with the government and the LDP over the financial bills. The Liberal Party chose to reserve its stance, pointing to some remaining differences over the handling of the ailing Long-Term Credit Bank of Japan.
However, the LDP and the opposition camp are expected to start working on a new set of financial bills based on their agreement.
Speaking to reporters after the meetings, Obuchi expressed gratitude for having been able to achieve a major breakthrough ahead of his departure for the U.S. “Now that we have a good prospect for the financial bills clearing the Diet (during the current session through Oct. 7), we can set a milepost toward wiping out uncertainty over the financial system,” he said. “And I am glad that I can explain this to President Clinton.”
Noting that the nation’s fragile financial system is a major reason behind economic uncertainties, Obuchi said the agreement on the bills will help revive the nation’s economy, and thereby have a positive impact on the Asian and global economies.
Friday’s concession, which came after days of haggling between the ruling and opposition camps, was made with the government and the LDP accepting almost all features of a scheme proposed by the DPJ, Heiwa-Kaikaku and the Liberal Party.
The three parties’ scheme calls for creation of an independent body — a “financial resuscitation committee” — to hold full authority over financial administration and supervise controlled liquidation of failed financial institutions.
Under the scheme, failing major banks would be temporarily placed under state control through government purchases of common stock, thereby facilitating their controlled liquidation.
Also, the three parties have been calling for setting up a Japanese version of the U.S. Resolution Trust Corp. to single-handedly collect nonperforming loans, by integrating the existing Resolution and Collection Bank and Housing Loan Administration Corp.
The handling of LTCB as well as the extent of authority given to the planned resuscitation committee had remained sticking points, necessitating the top-level talks.
Speaking to reporters following his meeting with Obuchi, DPJ President Naoto Kan said the government and the LDP have almost fully accepted the financial stabilization scheme proposed by the three parties. “Now, we are ready to work together with the government and the LDP to make some necessary revisions to our proposed scheme,” he said.
Specifically, he said, the LDP has accepted the opposition’s demand to scrap a financial stabilization law which allows the injection of up to 13 trillion yen in public funds to bail out weak but solvent banks. “The prime minister has given his pledge to scrap the existing financial stabilization law. Thus, there will be no legal ground for using the 13 trillion yen fund to help bail out LTCB,” Kan said.
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