The Comprehensive Package to Stimulate Real Estate Liquidity

-----Resolving the Bad Loan Problem and Promoting Urban Development-----

(Provisional Translation)

1. Improving the Profitability of Real Estate Held as Collateral

To raise the profitability of collateralized real estate and create more livable towns, the government will promote the following measures:

(1) Settlement of complicated ownership of Collateralized Real Estate by self-auction, etc.The Housing Loan Administration Corporation (HLAC), the Resolution and Collection Bank (RCB), and the Cooperative Credit Purchasing Corporation (CCPC) will take advantage of auctions of collateralized real estate, including self-auctions, to expedite the settlement of collateral ownership.

(2) Effective utilization of fragmented Collateralized Real EstateThe government will settle ownership on small fragmented land which are entirely or almost of no use, and thereafter effectively apply various land-readjustment measures to promote effective use of land.

<1> Combining collateral by flexibly applying land-readjustments

The government will flexibly apply special tax treatments for land-readjustment purposes and combine small fragmented land in urban areas into larger sites for high-quality housing and urban development, in cooperation with the Organization for Promoting Urban Development and other organizations, to promote the effective use of urban land

(Note) The government will relax regulations on land acquisition in case it is for land-readjustment purposes

<2> Selecting a few typical cases of small fragmented land and thereafter proposing plans for effective use of each of them, in cooperation with the private sector

<3> Using the Housing and Urban Development Corporation (HUD)

Since it is difficult for private sector companies alone to utilize collateral, the HUD will promote effective land use by serving as a redevelopment coordinator for joint projects with the private sector.

(3) Using land for public purposes so as to promote better lives for people

The government will utilize land of which the ownership has already been settled by (a) using existing framework for injecting public money effectively to meet public policy purposes and (b) applying them to the fields listed in <2>

As a first step, the HLAC, the RCB, and the CCPC will submit to the government a list of collateralized real estate amounting to yen 380 billion and located at 900 places.

(Note 1) All listed land will not be utilized for public purposes. Each land will be bought with public money only when it meets certain conditions

(Note 2) Private-sector entities as well as public-sector entities may participate in the project

<1> Existing public-money frameworks

(a) The early acquisition system of land for public purposes

(b) Various subsidy systems

(c) Finance by the Japan Development Bank and other public institutions

<2> Possible demands for the utilization of public land

(a) Welfare facilities for the elderly, small children, handicapped people, etc.

(b) Facilities for emergency measures in urban area (for refuge, evacuation, etc. )

(c) Land for road construction and for housing

(d) Facilities for revitalizing small commerce and industry

(e) Facilities for education, scientific research, and sports

(f) Infocommunication facilities

2. Securitization of Real Estate Held as Collateral

(1) The government will improve the profitability of collateral as mentioned above, and will promote securitization of real estate for investment in the long run by introducing Japanese Real Estate Investment Trust (REIT)(2) The government will relax regulations and taxation pertaining to the process of securitization, in order that it be carried out more diverse, simple, and inexpensive way. This will help banks solve their bad loan problems and promote collateral liquidation under the principles of"Free, Fair, and Global"of the Tokyo Big Bang by the Year 2001.

(3) The government will improve investor protection by such means as expanding the definition of "Securities"for the purpose of Securities and Exchange Law to include the Mortgage Backed Securities (MBSs), to cope with increased number of purchasers. The government will also promote more investments from abroad under the new Foreign Exchange Law.

(4) The government will operate the "Package for Securitizing Real Estate held as Collateral"through those measures as follows.

<1> The government will immediately designate trust certificates on real estate business loans as securities under the Securities and Exchange Law, and will permit that both financial institutions and securities companies would deal in those certificates, and give liquidation to petty trust certificates on collateral.

<2> The government will allow the establishment of special purpose companies in Japan, by revising the Commercial Law as it pertains to transferring credit and other matters, and investigate legal arrangements including the possibility of making new law for establishing Special Purpose Company (SPC) as of business year 1998 at the latest.

<3> The government will make full use of insurance companies, build a pricing and rating system immediately, and promote adequate distribution of information to inventors to bolster the attractiveness of instruments.

<4> The government will examine the desirable taxation system with tax authorities concerning transactions of petty trust certificates and SPCs for securitizing bad loans smoothly.

3. Promoting the Exchange of Information on Collateralized Real Estate

The government will establish a basic and comprehensive information system and database of real estate held as collateral in Japan in order to improve soundness of the real estate market.

(1) The HLAC, the RCB, and the CCPC will establish a database for the collateral of and disclose information on them.

(2) The government will immediately improve the rating system for real estate in general, including collateral.

(3) The government will disclose information more widely on the evaluated price of each item of collateral.

(4) The government will improve the database of the rent of commercial real estate.

4. Request to the Private Sector

The government will request that the private sector promote the positive, effective use of land.

5. Establishing a Council for the exchange of information to Support the Package

To support the Package, the government will establish the Countermeasure Liaison Council for Real Estate Liquidity, an inter-ministrial council, and cooperate with the Liaison Conference for Jusen-Related Business.

[About the financial system reformation (The Japanese version of the Big Bang)]