Koizumi promises bold move on bad bank debts
By Bayan Rahman in Tokyo
Published: January 4 2002 20:31 | Last Updated: January 4 2002 20:57
Junichiro Koizumi, Japan's prime minister, on Friday renewed his promise to use all possible means to avert a financial crisis, saying the government was prepared to take bold and flexible measures to prevent confusion in the financial system while dealing with the problem of bad bank loans.
Mr Koizumi said plans to weaken the state guarantee on bank deposits would go ahead, despite calls from some politicians for the plan to be postponed for fear of a run on weaker banks.
The partial lifting of the blanket guarantee on bank deposits could prove a crucial test of public confidence in the government and particularly Mr Koizumi, whose popularity remains high.
Friday's comments underlined his strategy of reassuring the public that his administration is tackling the bad-loan problem that plagues the banking system while insisting that the government should press ahead with its plan to weaken protection for bank depositors.
The protection will be weakened in two stages, resulting in only deposits of up to Y10m (£52,600) being guaranteed.
Confidence in the banking system was shaken last week when Japan saw its first bank failure since Niigata Chuo Bank collapsed in October 1999. Ishikawa Bank, a small regional institution, failed on December 28. Ishikawa had been the subject of a special Financial Services Agency inspection, alongside a handful of other small institutions, whose fate may be decided over the next few weeks.
The FSA's special inspections of leading banks is also expected to end this or next month, heightening concern about the state of the banks' loan portfolios and leading some political observers to warn that Mr Koizumi could face a political crisis if any of the leading banks go bankrupt. As Japan's economy weakens, an increasing number of companies are struggling to pay off their loans, leaving the banking system creaking under the weight of risky lending. www.ft.com/japaneconomy |
