Economic policy adrift

経済政策の迷走

All of this is regrettable. The urgent task for the government is to complete an integrated game plan to rescue the banking system and revive the economy. The continuing policy drift will only make things worse, possibly leading to political turmoil as well. A combination of economic unrest and political instability is a recipe for social agitation.

That is why Prime Minister Junichiro Koizumi must exercise leadership up front and ensure that policy is speedily implemented. He is sticking, rightly, to his "no reform, no recovery" slogan but is leaving everything to Mr. Takenaka, an academic with few political friends. The embattled financial services minister now needs active support from the prime minister.

The Takenaka blueprint has come under attack for two reasons. First, it envisions a "hard landing" — a cash infusion into capital-short banks, a measure that could put one or more of them under government control. Second, it has been worked out without customary coordination with the LDP.

The Takenaka strategy boils down to assessing loans more accurately. For that, he relies on a U.S. method known as "cash discount flow," a radical departure from the lenient practice of the past that has tended to retard or limit write-offs. As a result, bad loans would increase temporarily, forcing banks to put up more loan-loss reserves. If they fell short of capital, the government would supply cash and, if necessary, put them under its care. Top managers of such banks would have to resign their posts as an expression of responsibility.

This banking reform plan also targets an accounting rule that has been criticized as a trick for "padding" capital. The rule lets banks count as part of their capital a large amount of future tax credits for loan-loss provisions. If Mr. Takenaka has his way, the weight of such anticipated tax refunds would be drastically reduced. As a result, the capital-to-asset ratio at some major banks could drop below the minimum 8 percent required for international banking, leaving them with little choice but to accept government aid.

As expected, top banks have balked at the Takenaka plan. In a joint statement issued on Friday, they said they would not accept the proposal to change the tax-refund calculation method. They also made it clear that they would reject demands for a management shakeup even if they received public assistance. The LDP and its coalition partners, while calling for a cash infusion, have also objected to the rule change.

One thing is clear beyond all doubt: The bad-loan problem cannot be postponed any further. Makeshift measures will only aggravate the mess, as evidenced amply by past experience. Hard-hitting measures, perhaps including a government bailout, are needed to clean up the mess once and for all. One way or another, bankers will have to accept responsibility. The Takenaka plan is not perfect. There may be some technical details to be ironed out, but its basic principles — strict accounting of bad loans and the shoring up of bank capital, if necessary, through cash provisions — should be maintained.

However, Mr. Takenaka and his task force of private specialists should avoid unnecessary friction with politicians. Members of the ruling parties are understandably angry that they have been left completely out of the loop. Some have even demanded his resignation. Opposition parties have introduced a censure motion against him.

After all, this is Japan. Nothing can get done without an effort to foster consensus. Even though Prime Minister Koizumi favors the top-down approach, a certain amount of coordination with the governing parties is essential. Mr. Takenaka and his team seem to have gone a bit too far in bypassing the usual route of prior consultation.

Mr. Koizumi, who gave Mr. Takenaka two economic posts in last month's Cabinet reshuffle, bears heavy responsibility for steering the economy in the right direction. An extra budget is now considered necessary not only to ease the impact of deflation but also to close a widening revenue gap. But the prime minister, apparently overeager to keep his commitment to spending restraint, remains silent on this pressing issue.

The Japan Times:
October 28, 2002
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      小泉首相は指導力を発揮して、迅速に政策を実行させねばならない。首相は問題のすべてを竹中氏に任せている。学者出身の竹中氏は政界に支持者が少なく、政策実行に首相の強い支持が必要だ。

      竹中構想が批判されているのは、過小資本に陥った銀行に公的資金を注入し、必要な場合には国有化するという「ハードランディング」を求めているからだ。また、自民党と協議なしに計画が作られたことも批判された。

      竹中構想は、「割引現在価値（ディスカウント・キャッシュ・フロー）」という考えを導入し、債権の評価をより正確にする。この方式では、一時的に不良債権が増加するので、銀行は引き当てを強化する必要がある。その結果、過小資本に陥った銀行には、政府が公的資金を注入、必要な場合には国有化する。この場合、経営陣は総退陣せねばならない。

      また、銀行が不良債権処理で支払った税金が将来返ってくることを見込んで、自己資本に算入している「繰り延べ税金資産」を圧縮する。その結果銀行によっては自己資本比率が8%以下に低下し、公的資金注入を受けざるを得なくなる。 不良債権処理は、これ以上引き延ばせない。一時しのぎの方策は事態を悪化させるだけだ。

      竹中構想の基本原則は正しい。

      しかし竹中氏とプロジェクトチームは、政界との無用の摩擦を避けるべきだ。与党3党の関係者は竹中氏から政策転換について相談がなかったことに憤激している。 小泉首相は、正しい経済運営をする責任がある。デフレ対策のためにも、財政収支を改善するためにも補正予算は必要だが、歳出抑制に固執する首相は、この問題についてまったく動いていない。

The Japan Times Weekly
November 2, 2002
(C) All rights reserved