Tokyo Gov. Shintaro Ishihara's surprise proposal to impose a 3 percent tax on gross profits of large banks in the metropolis drew a flurry of protest from the nation's financial institutions Tuesday. "The plan is at odds with national policy," Michio Ochi, chairman of the Financial Reconstruction Commission, said in a news conference. "A local government is attacking financial institutions for the sake of revenue at a time when public funds are being used to bolster financial institutions and rebuild Japan's economy." Ochi said the plan, which targets Tokyo banks with a fund volume of more than 5 trillion yen, would have more adverse effects than benefits for the banks' management. He said it would also hamper banks' efforts to repay public funds they received to reinforce their financial bases. Meanwhile, Home Affairs Minister Kosuke Hori expressed reservations about the Tokyo governor's plan. Hori said at a separate news conference that the plan has to be considered from the point of view of whether "it is good timing to introduce it" with economic activity so sluggish, and whether it contravenes the Local Tax Law. Hori, whose ministry oversees local government finances, told a news conference he would like to hear the Tokyo metropolitan government's views on the tax plan. While expressing understanding about the plan, which is designed to help the metropolitan government weather a financial crisis, Hori questioned its wisdom. "The Tokyo metropolitan government has probably studied it sufficiently, but I wonder if it's a good idea to target only banks," he said. "I get the impression that they came up with the plan too hastily," he said. The proposal will be submitted to the metropolitan assembly later this month. If passed, the tax will begin April 1 and be in place for five years. Thirty financial institutions would be affected. That figure includes nine city banks, such as Bank of Tokyo-Mitsubishi and Dai-Ichi Kangyo Bank, eight regional banks and six trust banks. The list also includes the Bank of Japan, but given its special corporate status, the tax rate for it would be 2 percent, metro officials said. The announcement caused phones at the city office to ring all morning, with officials fielding inquiries concerning the proposal from banks and from city officials from cash-strapped Yokohama and Osaka. Following the announcement Monday, the Japanese Bankers Association immediately issued a statement accusing the plan of being "extremely abrupt" and saying banks are "absolutely against" the tax.
