Stock plunge to below 9,000 calls for change of economic policy -- Akahata editorial, October 4
The Nikkei Stock Average index closed on October 3 at below 9,000.
Prime Minister Koizumi Jun'ichiro has reshuffled the cabinet to use public funds to speed up write-offs of bad loans held by major banks. This has been a major cause of the tumbling share prices, which had been in a state of suspension.
At a time of a deepening economic recession, the government has forced the people to pay an extra 3 trillion yen (24 billion dollars) for social services, and is even planning to collect more in taxes from working people. No doubt such a policy will deal a heavy blow to the nation's economy.
It stands to reason that the stock market was disturbed, as the government defiantly declared to enact a policy which will sharply increase business failures and unemployment.
Government wants banks to give up small businesses
Most of the bad loans which banks now hold are with small- and medium-sized businesses, caused mainly by the prolonged recession. It is different from bad loans in the bubble economy, a consequence of reckless loans. Putting "improved bank profitability" on top of economic policy, the Koizumi Cabinet has encouraged banks to discard these small businesses in the name of early write-offs of bad loans.
Writing off bad loans could have been helpful to settle the accounts of reckless loans in the aftermath of the bubble economy. Busting small- and medium-sized businesses, which are operating businesses and maintaining jobs in the face of the recession, will worsen the economic situation.
Such actions of banks caused a doubling of bad loans from the previous year instead of a reduction of bad loans on hand. In fact, the net increase of bad loans in fiscal 2001 was 10 trillion yen (80 billion dollars), the biggest ever. Banks themselves are complaining about the losses accrued from writing off bad loans. This is the exact opposite of the economic resuscitation which the government proposed.
It has become obvious that the Koizumi Cabinet policy of writing off bad loans by using strong measures only aggravates the vicious circle.
The recent trend of share prices shows that even market investors, who support the Koizumi "reform," are increasingly concerned about the outcome of banks' accelerated steps to dispose of bad loans.
The government is contemplating to push banks into writing off non-performing loans even by using up their equity and then use tax money to make up for their losses.
Takenaka Heizo, state minister in charge of financial services, economic, and fiscal policy, and Fiscal and Economic Policy Council members from the private sector are saying they won't hesitate to get banks temporarily nationalized so that the government can forcibly clean up their loans.
The government is thus ready to directly take further steps to bankrupt small- and medium-sized businesses.
It is very likely that the public money the government intends to use to make up for the losses caused by write-offs of bad loans will be financed by increased burdens on the people. Key financial experts at the government council said that the amount of public money to be used for banks will be more than the 15 trillion yen allocated in the special account of the national budget to deal with financial crisis.
Change politics so that people's living conditions are maintained
Using a large amount of people's tax money to bankrupt small- and medium-sizes enterprises and pushing business to the bottom of the depression is sheer madness.
Some people in the government and business circles are saying that tax reductions for major banks will be necessary because the economic situation will get worse due to the disposal of bad debts. This is definitely wrong. The government plan will only deprive the people, who are the source and driving force of Japan's economy, of their energy. How can such a step revitalize the economy?
As the Japanese Communist Party called for in the four-point proposal published in late September for protecting people's living conditions from serious economic crisis, the government must change the policy so that people's living is supported. This is the only way out of the depression. (end)