Tokyo Gov. Shintaro Ishihara's plan to levy a new tax on large banks in the metropolis has created a stir. The banks are dead set against it, but Tokyo citizens -- and the public at large -- are applauding the idea. No Japanese politician, national or local, has made such a widely acclaimed decision in recent memory.
The plan targets some 30 banks that have assets of 5 trillion yen or more and that have head or branch offices in Tokyo. The tax, which would be imposed for five years, is a kind of local business tax, but it is significantly different from the existing one: It would be imposed not on income, but on the size of the business, which is measured by sales. This means that banks would have to pay the tax even if they were running a deficit.
Japanese banks, particularly big ones, are unpopular these days, and with good reason. They are making handsome profits because their cost of money is almost zero. The 30-odd banks in question have reportedly made trillions of yen in business profits in each of the past several years. Many of them have bolstered their capital with massive government aid, yet they don't have to pay the business tax because bad-debt writeoffs create net deficits in their books.