Digest

The financial institutions Sanyo Securities, The Hokkaido Takushoku Bank, and Yamaichi Securities went bankrupt one after the other during one month recently in Japan. To compensate for the loss of capital in the companies which went bankrupt, the government extended special financial support from the Bank of Japan. The amount of this support was about 3 trillion yen.

In addition, in order to prevent further bankruptcies among financial organizations and to improve confidence in the Japanese financial system, former Prime Minister Kiichi Miyazawa and former chief secretary general Seiroku Kajiyama proposed a plan in which capital loans of about 10 trillion yen would be made.

In the Kajiyama plan, the national debt amount would be issued on the security of government-protected stock, and the government would buy bank stock. The possibility of the Liberal-Democratic Party adopting this plan is growing.

However, the uneasiness that people feel toward the financial system will not necessarily disappear if and when these plans are adopted. When additional capital is again required in order to prevent financial organizations from going bankrupt, the government does not specify the prospect of future funds.
The Kajiyama plan is the last financial means of support.

When more capital than this becomes necessary, only after other governmental expenditures have been reduced in the budget can additional capital be shifted over to the banks. Then severe opposition will naturally be heard from the Liberal-Democratic Party assembly members who had been receiving the support of groups that profited under the old system of expenditures.

Though the Hashimoto government is now facing an unprecedented situation, it is doing its utmost to come to terms with the situation.