Financial Services Minister Heizo Takenaka on Friday denied he violated Cabinet guidelines by meeting with the chiefs of U.S. investment bank Goldman Sachs Group Inc. and Sumitomo Mitsui Financial Group Inc., as reported by a magazine.

Takenaka denied the part of the report that said he had referred to possible nationalization of certain banks and that he had violated guidelines for Cabinet ministers prohibiting them from receiving entertainment from the industries under their supervision.

Takenaka, who doubles as economic and fiscal policy minister, said he met Henry Paulson, chairman and chief executive officer of Goldman Sachs, and SMFG President Yoshifumi Nishikawa “for a short time,” but declined to say when and where.

“I don’t comment on details, because the issue could be brought to a court,” he told a news conference when asked about the report carried in the March 13 issue of the weekly magazine Shukan Bunshun.

The report, quoting a source close to the Financial Services Agency, said it was highly likely that Takenaka told Paulson and Nishikawa during a meeting around Dec. 12 that he would not put SMFG under government control.

“I never referred to the possibility of nationalizing individual banks,” Takenaka said. “That could never happen.”

On Jan. 15, SMFG announced it will issue convertible preferred shares worth 150.3 billion yen the following month, all of which would be purchased by Goldman Sachs, to accelerate bad-loan disposals by improving its financial standing.

Takenaka said he sent a letter of protest to the publisher, Bungeishunju Ltd., on Thursday through his lawyer. He said he will take strong action if the publisher fails to issue an apology to restore his honor.

Takenaka sounds alarm

Japan is in danger of falling into a pit of “loan shark hell,” in which it is forced to borrow only to pay off more debts, Financial Services Minister Heizo Takenaka said Friday.

“If we have to borrow to pay interest (on government bonds), the outstanding debt will grow infinitely, and go out of control,” Takenaka told the House of Councilors Budget Committee.

Takenaka reiterated that the government is determined to achieve a primary balance surplus by early next decade. In a state of primary balance, revenues and expenditures are equal, excluding debt-servicing costs and government bond revenues.

Finance Minister Masajuro Shiokawa told the committee that Prime Minister Junichiro Koizumi’s government is trying to change its fiscal policy structure by using profits to be generated from structural reforms.

“The outstanding public debt is now close to 700 trillion yen,” Shiokawa said. “But Japan has assets, and we will use them to reduce debts.

“The nation’s finances will improve markedly if sustained annual economic growth of 2 percent is achieved.”

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.