12 October 1998

Kiyoshi SASAMORI
General Secretary
Japanese Trade Union Confederation

1. The Bank Reform Bill, which had been introduced by the Democratic Party, The New Peace Party (Shinto Heiwa) and the ruling LDP, passed the House of Councilors on 12 October. The original bill was proposed by the opposition parties and jointly revised. According the newly concluded law, the Financial Reform Committee, which will be formed within the year of 1998, will be responsible for planning/drafting the settlement of bank failures and the financial crisis management. A measure to settle bankrupted banks should be either 1) temporary nationalization of bankrupted banks by acquiring their stocks, 2) custodianship by administrators or 3) take-over of their business to public bridge banks. The law also allows public funds to be infused to banks that will take the responsibility for bankrupted banks. Furthermore, the Housing Financial Credit Recovery Organization will be integrated with an organization to recover non-performing loans into the Settlement & Recovery Organization (Japanese edition of the RTC) in order to facilitate recovering processes. With the adoption of the Law, Japan got ready for the settlement of bankrupted banks.
   
   
2. The law should be highly evaluated because it was concluded based on a bill introduced by the opposition parties proposing a more transparent scheme of the bankruptcy settlement than the LDP/Government and because the Diet had recovered its original legislative functions of drafting and concluding laws.
   
   
3. However, it was concluded too late after too long consultations among the ruling and opposition parties even though Japan was in a serious circumstance: Japanese financial system was in a critical condition and was loosing its confidence both at home and abroad; the recession was getting worse as described by the short-term forecast of the Bank of Japan; and Japan was about to fall into the deflation spiral. Even though one of reasons for such delayed conclusion was the lack of the government's accountability to give persuadable explanation to the people about problems including the one of the Long-term Credit Bank of Japan, both ruling and opposition parties should repent of the lack of prompt response.
   
   
4. A new framework of the settlement of bankrupted banks has been finally established with the conclusion of this Law. It is now necessary to set up a system of recapitalising banks through the infusion of public capitals and to recover the functioning of the financial system, avoiding moral hazards, excessive loss of confidence and further insecured employment situation. At the same time, full-scale and practically drastic economic and employment measures should be taken to ease serious sense of insecurity about economy and employment and to link to the financial reform to the economic recovery. Rengo requests the prompt implementation of such measures, including permanent tax cuts.