In ''Japan's real crisis'' (Cover Story, May 18), Brian Bremner states that information about Japan's fiscal investment and loan program is not disclosed appropriately. In fact, a detailed report is issued annually to the public. This information is accessible in English over the Internet (

Mr. Bremner contends that the outstanding fiscal investment and loans are identical to the national debt. Japan's fiscal investment and loan program is a system under which funds accumulated through government organizations and the credit system are channeled to local governments and public financial institutions in the form of investments and loans. It is essentially the same as federally assisted credit programs in the U.S. Accordingly, the program's outstanding liabilities are not included in general government debt. This classification is in accordance with the U.N. System of National Accounts. Moreover, the portion of the investment and loan program apportioned to loans to central and local governments is counted as debt of the relevant government, and thus it is erroneous to count this portion twice by including it among general government debt.

Second, the fiscal investment and loan program has no nonperforming loans. As for the public financial institutions, major recipients of those loans, the average bad-debt percentage is reported as 0.78% as of the end of March, 1997, well below the corresponding percentage at major private-sector banks (3.34%). Each of these institutions has taken preventative measures in the form of loan-loss reserves, capital, and provisions.

Finally, all Japanese banks are already reporting the amount of bad loans as of March, 1998, based on disclosure standards of the Securities & Exchange Commission. The recently approved Financial System Reform Law will expand this disclosure standard to all the depository institutions' financial statements on a consolidated basis from March, 1999. We are confident that these measures will enhance the transparency of the quality of loans made by the private financial sector.

Naoki Kajiyama
Counselor, International
Public Relations
Ministry of Finance


Updated June 11, 1998 by bwwebmaster
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