Every time you think you've heard the most implausible objection to fixing the ailing Japanese banking system, a worse one comes along.
Japan is in a tizzy over Financial Services Administration chief Heizo Takenaka's plan to dispose of non-performing loans that have stifled the banking system. Takenaka was appointed by and enjoys the support of Prime Minister Junichiro Koizumi.
Takenaka has come under unprecedented personal and profession attacks from his country's largest banks and the politicians they control. Now we have Hiroshi Ota, an anti-Koizumi editorial writer for the Yomiuri Shimbun newspaper, claiming that advice given by Glenn Hubbard, the chairman of President George W. Bush's Council of Economic Advisors, has a devious, ulterior motive. Hubbard endorsed Koizumi's desire to reform the banks. On Oct. 30 he stated he was encouraged that Koizumi's plan would "reinvigorate the banking sector and revitalize the economy."
Hubbard ticked off the attributes of Takenaka's plan: steps to address non-performing loans, corporate restructuring, reform of bank operations and governance. He also mentioned tax reform measures designed to promote growth.
For this he got slammed by Ota, who says Hubbard has offered "ill-advised advice." Ota said "some analysts" regard Hubbard's remarks to be "in line with US investment fund companies' intentions to buy up Japanese banks and other corporate entities at bargain-basement prices."
What Ota wrote is totally absurd, of course. Yet this attack is calculated to play on Japanese fears.
As for Hubbard, he's a fair-minded player who's giving Japan similar advice to what has been offered for some time by private-sector economists around the world.
For another thing, Japan may not be experiencing growth, but one thing it does have plenty of is cash. If Japanese financial institutions are available for Ota's bargain basement prices, then why don't you see the Japanese themselves snapping up the bank shares? The reason is simple. While banks may be in the basement, figuratively speaking, they are no bargain given that there is formidable opposition to banking reform.
Still, this isn't a new theme for Ota. Four years ago, on Sept. 4, 1998, Ota was quoted on the World Socialist Web site as follows: "Does it mean that, weakened by the collapse of the biggest economic bubble in history, big banks should end up at the mercy of ruthless international speculators?" Japan's old boys are breaking out the scare tactics.
Ota quoted a report from the Japan Research Institute that Takenaka's plan would cause a Japanese yen 93 trillion (US$760 billion) contraction in bank lending, 3.32 million people losing their jobs, and a drop of Japan's gross domestic product by as much as 6.4 percent.
All that, mind you, from a plan to change the rules of taxation and corporate accounting for the banks? The gentlemen doth protest too much, methinks.
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