Japan Bank Reform In Doubt As Parties
Wrangle Over Pact
By ANDREW TORCHIA
Dow Jones Newswires
TOKYO -- Two days after Japan's warring political parties announced an
agreement on banking reform, the pact's future was thrown into doubt as
the parties resumed wrangling over key provisions of it.
Naoto Kan, head of the main opposition Democratic Party, said Sunday
that the agreement might be scrapped and hinted that his party could press
for early general elections as a result.
"We must be ready for the possibility that the agreement will break down,"
Kan said in a speech at a party meeting, urging party members to step up
preparations for elections.
Yoshiro Mori, secretary-general of the ruling Liberal Democratic Party,
conceded on national television that big areas of disagreement with
opposition parties on banking reform remained.
"It would be absurd to say that the situation has been resolved," Mori said.
On Friday, after a month of talks, the LDP and the opposition announced
a "basic agreement" on cleaning up Japan's mountain of bad bank debt.
Insolvent banks would be liquidated or placed temporarily under state
control, and a new body would use public money to buy up bad loans.
The agreement had been anxiously awaited by Japan's crumbling financial
markets, and came just in time for Prime Minister Keizo Obuchi to present
U.S. President Bill Clinton with evidence that Japan is acting on its
economic problems when the two men meet in New York this Tuesday.
The apparent unraveling of the pact over the weekend could therefore deal
another blow to the markets and complicate Obuchi's talks with Clinton.
One Democratic Party lawmaker appeared to confirm Sunday that
Friday's pact lacked substance, and was merely a failed attempt to create
the appearance of consensus and help Japan save face in the international
community.
"We just wanted to give Mr. Obuchi a little help for his talks with
President Clinton," said Yoshito Sengoku.
On Friday, opposition parties announced the LDP had accepted their
proposal for a temporary nationalization of troubled Long-Term Credit
Bank of Japan, one of the country's largest banks. This would mean
abandoning the LDP's original plan to use a Y13 trillion pool of public
money to inject capital into LTCB before arranging a rescue merger for it.
The LDP said nothing publicly to contradict the opposition on Friday, but
on Sunday Mori and other LDP officials were once again leaving open the
possibility of returning to their original plan.
Mori described the opposition's idea for the nationalization of LTCB as
merely an "option", and said it would still be legally possible for the Y13
trillion fund to be used for the bank.
"We have not agreed on this issue," said Kansei Nakano, a top
Democratic Party official.
Another key part of the agreement, reform of the Finance Ministry, was
also in doubt as the parties sparred over how long this would take.
On Friday the opposition announced that the LDP had agreed to deprive
the powerful ministry of its authority to set policy for the financial industry,
transfering the authority to a new committee that will run the banking
clean-up scheme.
But while the opposition said this would occur by the summer of next year,
LDP officials refused to accept that deadline on Sunday, saying they had
only agreed to "reach a conclusion" on the issue by next summer.
The two sides said on Friday that they aimed to pass legislation for Japan's
banking clean-up in the current session of parliament, due to end in early
October. But their disagreement on Sunday suggested this deadline might
not be met. Lacking a majority in the upper house of parliament, the LDP
needs at least some opposition votes to pass bills.
It remained unclear Sunday whether the Democrats were prepared to act
on their threat to try to force elections by deadlocking parliament. Lower
house polls don't have to be held before October 2000, and smaller
opposition parties are believed to be less prepared than the Democrats to
face early elections.
On the other hand, the LDP's public approval ratings are near record
lows, and the Democrats' meeting on Sunday agreed that cooperation with
opposition parties would be part of their election strategy.
"The Democratic Party aims to replace the ruling Liberal Democratic Party
by creating a new form of politics," Democratic Party secretary-general
Tsutomu Hata told the meeting.
-By Andrew Torchia; (813) 5255-2929; atorchia@ap.org |
