Diet committees will hold extraordinary sessions July 17-18 to scrutinize the planned public-funded bailout of ailing department store operator Sogo Co., legislators said Thursday.
The House of Representatives Finance Committee will meet July 17 to question the propriety of allowing the state-run Deposit Insurance Corp. to buy 200 billion yen in Sogo loans, at least half of which would be forgiven.
A House of Councilors panel on measures to revive the financial system and economy will meet to discuss the same issue the following day.
The ruling coalition and the opposition camp agreed to schedule the committee meetings despite the expiration Thursday of the three-day special Diet session.
The opposition has criticized the debt-forgiveness scheme and demanded the Diet examine whether Sogo, which has a network of 26 department stores, should receive a public bailout.
The scheme calls on the DIC to buy 200 billion yen in loans extended by Shinsei Bank’s predecessor, the Long-Term Credit Bank of Japan, with an eye to waiving claims on at least 97 billion yen of the total.
The government says the scheme will give Sogo a chance to revive itself and avoid dismissing its 9,900 employees.
Private economists, however, give Sogo little chance of rehabilitating itself and say the government is unlikely to recoup any of the 200 billion yen.
The government also fears that a Sogo failure could trigger “social disturbances” among the chain’s 10,000 wholesalers and producers.
Opposition parties, however, say taxpayers’ money should not be squandered propping up a failing private enterprise. The government’s Financial Reconstruction Commission approved the proposed bailout June 30, prompting the 72 other creditors of Sogo to pledge to forgive 630 billion yen of Sogo’s 1.7 trillion yen in debts.
The LTCB, which was put under state control in 1998 following its collapse from huge loan losses, was sold to a private-sector consortium led by Ripplewood Holdings LLC of the United States on March 1. It assumed the new corporate name of Shinsei Bank on June 5.