The government will ensure that the abolishment in April of its blanket protection of deposits in the event of bank failures will not cause a financial crisis, Financial Services Minister Hakuo Yanagisawa said Tuesday.
"I want (the public) to trust (the government), because there should be no unhealthy financial institutions" when the government ends full deposit guarantees April 1, Yanagisawa said after a Cabinet meeting.
State-backed guarantees for the full repayment of deposits at failed institutions will end April 1.
After this date, the state-run Deposit Insurance Corp. will only guarantee up to 10 million yen per time deposit.
The limited-guarantee system was slated to be introduced last April. It was postponed for one year, however, as the ruling coalition feared it could trigger a financial crisis by provoking depositors to shift funds away from troubled banks en masse.
The blanket guarantee was introduced during financial system turbulence in 1996 to discourage anxious companies and individuals from withdrawing deposits.
Yanagisawa said he believes the majority of financial institutions will be able to deal with the end of full-deposit guarantees, given their current financial strength and business performance.
He stressed, however, that market vigilance is crucial ahead of the April imposition of the limited deposit guarantee system.
Yanagisawa denied that failures are spreading from smaller financial institutions to second-tier regional banks.
He made this remark when asked about the collapse in late December of Ishikawa Bank, a second-tier regional bank based in Kanazawa, Ishikawa Prefecture.
Meanwhile, the minister repeated that, at this time, it is unnecessary for the government to inject financial institutions with public funds in order to bolster their financial bases.
Regarding calls of encouragement to this end by politicians and business leaders, he said, "I would like to fully study the ideas and backgrounds of remarks by such people."