LP's Ozawa backs gov't entities' bad-loan role

Japan Policy & Politics, June 29, 1998

TOKYO, June 23 Kyodo

Liberal Party (LP) leader Ichiro Ozawa on Tuesday threw his support behind a proposed strengthening of the functions of government-affiliated financial institutions with the use of taxpayers' money to resolve the bad-loan problem.

''I think it necessary to take public measures such as injection of money to expand the functions of such entities as Japan Finance Corp. for Small Business and People's Finance Corp.'' to prevent a credit crisis in the nation's banking system and to protect the finances of ordinary people, opposition leader Ozawa said at the Japan National Press Club.

The government is considering expanding the functions of such a government-backed financial institution to serve as a ''bridge bank'' to take over bad loans from troubled banks and to continue lending, an idea floated Monday by Finance Minister Hikaru Matsunaga.

A body like the U.S. Resolution Trust Corp., equipped with the power to probe and prosecute troubled banks and their incumbent and former executives, is needed to fully resolve the problem, he said.

Ozawa said he supports the use of taxpayers' money to protect depositors of troubled banks and sound borrowers from the banks.

But he expressed his strong opposition to the use of public money to protect financial institutions themselves, calling the idea nothing but the so-called convoy system.

''(Bad) banks should be weeded out by the market mechanism. At a time when small companies fail every day, it cannot be allowed that only banks are protected against the market rules,'' he said.

To cope with an unemployment rise expected as a result of banking industry reform, Ozawa said such measures as income and corporate tax cuts worth a combined 18 trillion yen and lifting of more regulations should be implemented to boost the economy.

Ozawa said the LP will continue issue-by-issue cooperation with other opposition parties, but he did not rule out the possibility of his party's cooperation with the ruling Liberal Democratic Party (LDP), given the urgent need for sweeping reforms.

Ozawa left the LDP in June 1993 and played a key role in wresting power from the LDP and in establishing the non-LDP cabinet under then Prime Minister Morihiro Hosokawa in August that year.

Ozawa formed the New Frontier Party, the biggest opposition force, in late 1994, but the party dissolved late last year. Early this year, he launched the LP.