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HOME  > Past issues  > 2008 February 20 - 26  > No tax money must be wasted on failed ‘Ishihara Bank’
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2008 February 20 - 26 [SOCIAL ISSUES]
editorial 

No tax money must be wasted on failed ‘Ishihara Bank’

February 22, 2008
Akahata editorial (excerpts)

Tokyo’s newest bank, established by Tokyo Governor Ishihara Shintaro, is on the verge of collapse.

In less than three years from its inauguration, the ShinGinko Tokyo Bank’s accumulated deficit reached 93.6 billion yen. This means that it has lost most of the 100 billion yen invested in it by the Tokyo Metropolitan Government. Even so, the metropolitan government submitted to the metropolitan legislature a plan to pump an additional 40 billion yen into the bank.

ShinGinko Tokyo was opened in April 2006 mainly by the Tokyo Metropolitan Government as promised by Ishihara in the 2003 gubernatorial election. To begin with it was reckless of a local government to attempt to run a bank. Nevertheless, Ishihara in disregard of warnings established the bank in his top-down decision-making style. This is why the new bank was dubbed the “Ishihara Bank.”

The main reason Ishihara gave for the establishment of the bank was the need to support small- and medium-sized businesses. The Japanese Communist Party Tokyo Metropolitan Assembly Members’ Group has closely scrutinized the Ishihara plan since ShinGinko Tokyo was established, and found out that already at the stage of planning that it was not intended to help smaller businesses and that its failure would be inevitable because the financial planning was too optimistic. Based on this analysis, the JCP demanded that the plan be canceled.

In fact, while the new bank promised depositors higher interest rates than other banks, its inability to use the fund to invest effectively and its aggressive money-lending strategy resulted in its holding huge amounts of bad loans. SinGinko Tokyo from the outset had no intention to do business with smaller businesses at all. It instead began lending money at 10 percent interest, which is two or three times higher than other banks’ lending rates.

At almost every assembly session, the JCP has demanded that the metropolitan government immediately stop running the bank with its growing amount of deficit. But Governor Ishihara always rejected the demand by saying, “It is still fine.”

At last Ishihara admitted that ShinGinko Tokyo has a “disorderly financial management” and promised to make clear management’s responsibility. It is clear, however, that Ishihara himself must take a heavier responsibility than anyone else.

Ishihara said to reporters, “How can I destroy ShinGinko Tokyo? If I do, it will cause troubles to the residents of Tokyo.” However, putting off the resolution of the bank’s failure will only hurt more Tokyo residents.

The ruling majority in the Tokyo Metropolitan Assembly must be held responsible for allowing the governor to act so recklessly. In praising Ishihara, the Liberal Democratic Party said, “The establishment of the new bank marks a first step from Tokyo towards financial reform.” The Democratic Party said, “The new bank gives us a dream and strong ambition.” The Komei Party said, “The bank is in the interest of small businesses.” If they now give the green light to using an additional 40 billion yen, their breach of the citizens’ trust will be even more serious.

The JCP opposes any additional use of funds for ShinGinko Tokyo and demands that a third-party body be created to deal with the resolution of the bank’s insolvency and that it be established without delay to take protect depositors and small businesses. Governor Ishihara must be held responsible for the debacle.

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