Japan Digest: Latest Takenaka Session With Bankers Bruised a Lot of Egos
Economy Minister Takenaka’s Monday session with Japanese bankers (Digest, 10/28) left bruised egos all around, Nihon Keizai said. It was governed by “an atmosphere of hostility,” in which the bankers tried to bring Takenaka down from his ivory tower with some straight talk about how things really work–and he responded by threatening to take his case to Prime Minister Koizumi. Takenaka called in the leaders of Japan’s seven top banks to deliver the message that “A final resolution to the bad- loan cleanup issue is politically important.” To that, one of the executives retorted: “Nonperforming loans are always emerging… There is no possible way that there will be a final resolution to the problem, so we ask that you do not confuse politics with the economy.” Takenaka, “visibly angered,” responded: “So you’re ready to go against the policies of the Koizumi government? If so, then I want you to say it. I’ll tell the prime minister for you.”
Toss of a Bone: Though Takenaka threw them a bone–a delay to 2005 of his plan to end their use of potential tax refunds as “capital” (Digest, 10/28), the only thing they really agreed on, Nikkei said, was creation of a new public-private entity to rehabilitate ailing companies. That rehabilitation, said Takenaka, “should not be handled by the Resolution and Collection Corp. Instead, a joint public-private organization may be an alternative… [and] we would like to ask the private sector” to help. To that, said Nikkei, the bankers agreed. Takenaka originally wanted RCC both to buy the bad loans and to become a super-lender, designating which companies should survive and keeping them afloat with government cash. But just about everybody else who has thought about that idea opposes handing RCC so much power.
Metamorphosis: So the Takenaka plan is metamorphosing from disposition of bad loans to rehabilitation of the borrowers. Nikkei said hopefully that if the new organization can attract talented managers and if it has a big enough pot of money, it could become a major aid to fixing the economy. But those are two enormous ifs. Just getting such a group up and running effectively will be a monumental task. In addition it’s not clear how it would raise the necessary money. The paper said the bankers now estimate that of Yen 27 trillion ($220 billion) in non-performing loans they hold, only about Yen 10 trillion is to companies that actually have good prospects–meaning that companies owing Yen 17 trillion are sooner or later going down the tubes.