The role of government-backed postal savings and insurance services needs to be reduced in the medium term to help private financial institutions boost profitability, a senior International Monetary Fund official said Monday.
"If the government maintains its current role in the private sector, the banks are likely to continue to have problems with their profitability," Stefan Ingves, director of the IMF's Monetary and Financial Systems Department, said.
Ingves was in charge of a one-year IMF-World Bank inspection into the Japanese financial sector that was completed this summer.
"The bigger, publicly supported lending schemes and deposit-taking institutions need to shrink their involvement in the financial sector if Japan's banking sector is to increase its profitability, consolidate, and develop new and better products," Ingves said.