![]() There is only one reason left why the Koizumi Cabinet clings to this policy and pushes forward it is because U.S. Takenaka Heizo, minister of State for Economic and Fiscal Policy, himself once admitted the need to break this cycle.Īlthough our living conditions and economy are in crisis, the government is going to speed up the write-off of bad loans. Such a reality proves that problem loans are not the source of the present economic slump but the consequences of it. ![]() More disposal of bad loans means more business failures, and the amount of bad loans never falls. The economic recession is, needless to say, the stagnation of the "growth areas." The Koizumi Cabinet gives top priority to a quick cleanup of non-performing loans, but this will do nothing but increase the economic slowdown. Without demand from "growth areas," however, the resource transfer will never happen, no matter how many dismal-performing businesses the government squashes. To begin with, the government has explained that the swift disposal of bad loans is for transferring resources from unprofitable sectors to profitable sectors through scrap-and-build tactics. Thus, the "package" itself will further weaken domestic demand. What's more, the "package" encourages corporations to carry out massive restructuring and personnel reductions as major steps to rebuild companies. The "package" seeks to revitalize the business of borrowers by setting up a new "industrial revitalization corporation." It is, of course, important to help ailing companies rebuild themselves, but the framework of this "package" will only lead to contraction of demand by "accelerating the write-off of bad loans." Such a measure will not be able to revitalize corporate finances. This is like opening the doorway to economic collapse. If this policy is put into practice, banks will go bankrupt themselves. No specification of time does not mean that the government has given up on the destructive policy. ![]() Some media comments describe the policy package as a major setback for Takenaka Heizo, state minister in charge of economic, fiscal and financial policy, on the grounds that it does not state when to start although the initial plan was one of starting in two years' time. ADOBE GOLIVE TRIAL TRIALThe policy package provides a framework by which enormous sums of public money can be used to make up for the damaged bank capital.Ī trial calculation shows that stricter assessment of banks' capital will drive banks into a rush to collect loans totaling 90 trillion yen (731 billion dollars), with the likelihood of leading to additional 3 million job losses. Under a stricter reassessment of banks' capital equity ratios by American standards, Japan's major banks will have to see a sharp drop in their capital equity ratios. The change will oblige banks to re-assess their loans under stricter standards than before, lower their ratings, and increase loan-loss reserves. The accelerated write-off of bad loans calls for the methods of calculating banks' loan risks and equity capital ratio to be changed to the American standards. What the cabinet described as assistance for small- and medium-sized businesses is no more than a token gesture and a shock absorber to allay the possible severe impact of the speed-up of the disposals of bad loans. The package primarily calls for the write-off of bad loans held by major banks to be accelerated, as Prime Minister Koizumi promised to U.S. "Anti-deflation" is in name only the announced measures are not intended to improve the people's living conditions or small businesses which are enduring hardships due to the prolonged economic recession. ![]() The Koizumi Cabinet has adopted a package of anti-deflation measures. Economic crisis deepens as irresponsible politics continues - Akahata editorial, October 31 ![]()
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