Despite criticism from the central government, Tokyo Gov. Shintaro Ishihara took another step Thursday toward levying a 3 percent tax on banks by briefing party representatives of the Tokyo Metropolitan Assembly. To go into effect, the proposal must be approved by the assembly during its regular session, slated to begin February 23. Officials of the assembly's Liberal Democratic Party, which is the largest with 32 out of 126 seats, said that the party intends to support the proposal, "no matter what headquarters says." The taxation plan, to which banks with assets of 5 trillion yen or more would be subjected, would bring in 110 billion yen a year for five years beginning in fiscal 2000, according to the officials. Meanwhile, central government ministers renewed their concerns over the tax, questioning its appropriateness and warning that it may have a negative impact on the nation's economy. Speaking at a news conference, Finance Minister Kiichi Miyazawa warned that confusion would result on the part of corporations if local governments move to impose local corporate taxes using differing standards. Chief Cabinet Secretary Mikio Aoki admitted that legally Tokyo can go ahead with the plan but urged for reconsideration. "We want to have a discussion with Tokyo officials and explain to them what problems will arise (from the plan)," he said. "We want them to act fully aware of the repercussions." Financial Reconstruction Commission Chairman Michio Ochi and Economic Planning Agency chief Taichi Sakaiya also voiced concern over adverse effects the new tax could have on the economy. Ochi said the new tax may force banks to become more selective in extending loans so as not to incur bad loans. Sakaiya said another credit crunch might occur if the new tax is imposed.
