After several days of wrangling over financial stabilization bills, opposition parties on Tuesday agreed to a policy chiefs-level meeting with the ruling Liberal Democratic Party.
The Democratic Party of Japan, the largest opposition party, was still calling for clarification of remarks made in New York by Prime Minister Keizo Obuchi about pumping public funds into the crumbling Long-Term Credit Bank of Japan. Nonetheless it agreed to start discussions out of concern that any further delay might have serious consequences on the economy.
Representatives of the DPJ and the Heiwa-Kaikaku parliamentary group met with the LDP and urged the ruling party to start working on the bills first. The LDP, however, also wanted to talk about other measures for improving the health of banks before they fail, according to the participants.
The Liberal Party did not join Tuesday’s discussion, saying it needs to see how negotiations develop first. The party may join the talks later, it said.
The LDP, DPJ and Heiwa-Kaikaku announced a basic agreement last Friday on a set of banking reform bills, including measures that would put the LTCB under state control. The deal also calls for abolishing a law passed last spring that set up a 13 trillion yen public fund for ailing banks. However LDP officials continued to assert that it would still be possible to inject public funds into the LTCB, angering opposition parties that refused to enter discussions with the LDP.
In an attempt to make the opposition enter discussions with the LDP on the financial bills, the LDP leadership made it clear on Tuesday that the LTCB will be dealt with by using the new plan of putting banks under temporary state control and not by injecting public funds into it. Meanwhile, Chief Cabinet Secretary Hiromu Nonaka said that the government hopes the LDP and the opposition camp will carry forward their negotiations on bills for stabilizing the financial system based on last Friday’s agreement between the two sides.
The agreement reached by Obuchi and opposition leaders, DPJ chief Naoto Kan, “is everything,” Nonaka said. The government “confirms the principle that the faith will be kept in (the LDP’s) proceeding swiftly with drawing-up of necessary bills” with the opposition camp, Nonaka said. “It will be impossible to revive the current scheme of 13 trillion” yen in public money earmarked to strengthen banks’ capital bases because the LDP and opposition leaders agreed to abolish the scheme, Nonaka said.
On condition the scheme would be repealed, the government “is calling on the LDP and opposition groups to consider what kind of crisis management (for the financial system) will be needed under new legislation,” Nonaka said at a news conference. Nonaka made the remarks following the LDP’s failure earlier in the day to get the DPJ’s understanding on a step to bail out the troubled LTCB.
In New York, Prime Minister Keizo Obuchi on Monday continued to call for the use of public funds to save the troubled LTCB and smooth its orchestrated merger with Sumitomo Trust & Banking Co.
Obuchi stressed the need for new legislation to allow the government to inject public money into troubled banks. The new legislation would replace an existing scheme, established last spring, to provide banks with 13 trillion yen in public funds to shore up their capital bases. “I think a plan of capital injection is necessary,” Obuchi told reporters traveling with him on a trip here. “We’ll hammer out a financial stabilization plan to replace the 13 trillion yen pool under the current law because it will be abolished.”
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