Banks seeking to help turn around borrower companies should not merely extend life support to businesses doomed to fail, reappointed Financial Services Minister Heizo Takenaka said.

“If revitalization means postponing revitalization, we have no revitalization,” Takenaka said. “We must instruct banks and keep a close watch on them to make sure of this.”

Takenaka’s statement is a warning to big banks to make sure heavy borrowers turn losses into gains, and to stop new loans if debtors fall short of their promises.

Banks in the past have continued to pledge new loans to struggling large borrowers that are also big employers.

The seven largest banks and banking groups last year issued aid worth roughly 2 trillion yen to ailing borrowers in exchange for restructuring plans and projected profits. The aid, constituting some 60 percent of the banks’ operating profits, included 1.3 trillion yen in debt forgiveness.

Conservative politicians argue that allowing these companies to fail would cause massive unemployment. But structural reforms can create much-needed jobs in regional economies, Takenaka said.

One such reform is channeling more business opportunities from the public sector to the private sector. This would lighten the burden on government coffers, reduce wasteful allocations of funds and create new jobs, he said.

“We must free up enterprises that have been monopolized by the public sector,” he said, noting that almost one-third of Japan’s gross domestic product is produced by the public sector.

Takenaka suggested that jobs could be created by “outsourcing” some local government services, apparently including over-the-counter services for residents.

“Macroeconomic indicators show signs of growth,” he said. “Now is our chance — right now.”

The very symbol of this movement will be privatizing Japan’s enormous postal services, which include mail delivery, savings and life insurance, he stressed.

Takenaka, who leads the Financial Services Agency and is also in charge of economic and fiscal policy, has been asked to draft a blueprint for postal reform by next fall.

There is a major road block in Takenaka’s path — the posts minister, Taro Aso, who has voiced skepticism over the privatization timetable and in the past has urged Prime Minister Junichiro Koizumi to sack Takenaka.

“Love is not a concept that exists in economics,” the economist said when asked whether he is loved or hated for pushing forward structural reforms. “But people who seriously worry about the future of this country understand why these reforms are necessary.

“It feels like we’ve made it to the third station (on a line with 10), at the foot of a mountain. We can see how far we need to go to get to the top, but the actual climbing starts now.”

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