A review of the nation's eight government-affiliated financial institutions is gaining momentum in response to Prime Minister Junichiro Koizumi's drive to abolish, integrate or privatize them. Shortly after Mr. Koizumi took power in 2001, he included the reform of those institutions in his "reform without any sanctuaries" plan. But action on this front was temporarily halted by a prolonged economic slump. The Council on Economic and Fiscal Policy, chaired by the prime minister, has begun conducting full-fledged discussions on the matter. The government and the Liberal Democratic Party are expected to work out a basic policy by the end of November, and the new form of such financial institutions will take shape in fiscal 2008.
In the past, these institutions played a role in the development of some industries and local economies, helping to stabilize people's lives. But there is less need for their services today. Critics also contend that these institutions are "stealing" business opportunities from commercial banks.
The financial institutions in question procure funds from postal savings and insurance by issuing bonds, then lend money with interest rates and repayment periods more advantageous to the borrowers than what commercial banks offer. Some of them lend money to medium-size and small enterprises, farmers and fishermen, and publicly-run local enterprises. Others offer long-term funds for projects of a public nature, including funds for development projects in Okinawa, as well as export, import and ODA-related financing.