As people in northeastern Japan devastated by the March 11 earthquake and tsunami are struggling to start their life anew, they are facing a big financial problem — that is — their debts. They are obligated to repay loans taken out in the past on what are now destroyed or damaged residences or business facilities; now they must take out new loans to build new residences or business facilities.
More than 200,000 buildings are estimated to have been destroyed or damaged in the disasters, most of them in Iwate, Miyagi and Fukushima prefectures. About half of them are unusable because they were fully or half-destroyed. Fishing boats, fisheries and other business facilities and agricultural machines were also destroyed or damaged.
Local financial institutions have an estimated outstanding balance of loans worth some ¥2.8 trillion. Many people have to pay back their loans even though they have lost property they had acquired after taking out the loans.
The government and the Democratic Party of Japan have worked out relief measures. The Japan Housing Financing Agency would provide low-interest loans to people who want to build new houses or buy new apartments. Repayment of their earlier loans would be put off, or the interest on them would be lowered.
In case they do not plan to get new housing, they would go through voluntary liquidation to be exempted from the repayment of earlier loans.
Private financial institutions and the Organization for Small and Medium Enterprises and Regional Innovation would set up funds, which would buy debts owed by small- and medium-size firms or extend new loans to them if there is a prospect of reconstructing their business.
But the government and the DPJ have to make adjustments with the opposition parties on relief measures.
If the debt problems are not solved, there is the danger that local companies, farmers and fishermen will opt to give up restarting their operations. This would also affect local financial institutions.
The central and local governments, local financial institutions and local agricultural and fishing cooperatives should cooperate to quickly work out ways acceptable to both creditors and debtors.
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