Press Conference by Taro Aso, Deputy Prime Minister, Minister of Finance, and Minister of State for Financial Services

(Excerpt)

(Tuesday, November 24, 2015, 11:13 am to 11:29 am)

[Questions and answers:]

Q.

This is the time of year when the government's report on political funds is released, and I would like to ask about the necessity of political contributions. I am very interested in what appears to be a revival of political donations by Keidanren, the Bankers Association, megabanks and others. During the financial crisis 18 years ago, public funds were injected into many banks – this was before they had been consolidated into megabanks – and, with these funds having recently been paid back in full, it seems that the push to resume political donations is picking up steam. Should banks run into operating difficulties in future, do you intend without hesitation to provide them with injections of public money if you are still minister at the time, and would your decision at such a time depend on whether or not a particular bank has been making political donations to the LDP?

A.

Whether a bank fails or not has a serious impact on depositors, as well as on the companies, individuals and others borrowing money from that bank and, as it is clear that this impact will be quite significant regardless of the size of the bank, the first priority is to minimize the repercussions of the bank’s difficulties. For example, we have adopted numerous approaches since the 1997 financial crisis to provide relief to financial institutions that have become insolvent as a consequence of non-performing loans, and these pioneering efforts in Japan have offered very useful examples for the countries that were in a panic following the 2008 Lehman Shock. In fact, we injected capital into Japan’s banks in an organized fashion to ensure that there were no sudden bankruptcies like Lehman Brothers. While the banks did not go unscathed, well-known banks absorbed or merged with other banks, with the major Long-Term Credit Bank of Japan disappearing, the Industrial Bank of Japan changing its name to Mizuho and so on. As a result, we were able to minimize the damage caused to Japanese companies from this unquestionably huge credit crunch, and this won us high marks, at least overseas. I have no idea how this is regarded in Japan. Iceland’s national government did not face Japan’s harsh fiscal situation, with its public debt then only 20% or so of GDP, but the relief it had to provide in the face of banks failing and banking operations coming to a halt abruptly pushed the national government into deficit, something that can be seen in another country. The fact that Japan, too, saved its economy from a credit crunch-induced insolvency by providing banks with relief offers us a lesson and, should such a situation arise in future, we will have to consider the various means available to offer relief in those particular circumstances. This is one of the jobs assigned to us.