Kyodo News A proposal by the Cabinet’s administrative reform headquarters asking Government Housing Loan Corp. to effective stop extending new loans is meeting stiff opposition from the Land, Infrastructure and Transport Ministry, promising heated debate toward the end of the year.

The headquarters secretariat, a coordinating body supervised by Nobuteru Ishihara, state minister for administrative and regulatory reforms, proposed to cut the amount of state money allocated to the corporation, which came to some 440 billion yen in fiscal 2001. This is the largest allocation of funds to any government-backed entity.

One in eight households in Japan holds a loan from the corporation.

The ministry said that if the corporation stops extending new loans, low-income households will be the first to suffer, and the policy of helping people acquire homes with tax money will be changed drastically. One-third of the houses built in Japan after World War II were purchased with the help of loans from the corporation, it said.

The corporation offers fixed-interest loans on a long-term basis — up to 35 years. Under the current low-interest rate trend, however, commercial financial institutions are extending loans at lower rates than those of the corporation, but the fixed-rate period is three to five years. When that period ends, the interest rates can change and households find it difficult to map out repayment plans.

Even if the corporation withdraws from the loan business and leaves the job to private institutions, a ministry official said, “It’s impossible for them (banks) to extend loans at fixed rates on a long-term basis because deposits are their financial resource.

“There is also concern about possible discrimination based on applicants’ professions and companies and the likely rejection of low-income families.”

When interest rates were high, the corporation had been extending loans at lower interest rates and filled the gap with money from the government as subsidies.

Ishihara also demanded that these interest subsidies be abolished, saying: “The government is reducing housing loan taxes. Is it really necessary to spend huge amounts of governmental money for housing acquisition?”

The ministry said, however, that the corporation is not using subsidies to cover red ink figures in its business but is returning them to its customers, stressing that the corporation differs from other state-linked corporations suffering from cumulative debts.

It said that if the job is left to the private sector, there will be a need for large tax reductions like those in the United States, to lessen the burden on users in times of high interest rates. This would seriously affect the state coffers, it said.

The ministry announced its own reform plans prior to the announcement of the reform plans by the secretariat Aug. 10, indicating a tug of war between the two toward the end of the year when final plans are to be worked out.

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