| BUSINESSWEEK ONLINE : FEBRUARY 22, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN BUSINESS
'The First Thing to Do Is Make All These Institutions Sound' As Japan's Minister of Financial Reconstruction, Hakuo Yanagisawa is on the hot seat. In the coming weeks, he needs to pressure major Japanese banks into a serious round of restructuring -- or billions worth of public funds to be extended to lenders could be squandered. Business Week Tokyo Bureau Chief Brian Bremner recently met with Yanagisawa to discuss just how he plans to pull off this high-wire act. Here are excerpts of their conversation: Q: Just how bad are things right now? A: If you look at the current financial institutions in Japan, and this isn't really reflected in the statistics, ordinary consumers are wondering whether it's appropriate to deposit their money in these banks. This has deteriorated the trust in financial institutions. In order to solve this, the first thing to do is make all these institutions sound. Our standards are high and tough, but it's needed. Q: The government will inject funds via preferred shares and subordinated loans. Will the government ever get paid back? A: Eventually, the government will recollect the public funds. I don't think the banks want to keep the government money very long. Otherwise, government intervention will be inevitable. Q: Why has it taken so long for Japanese banks to join the merger wave in the U.S. and European financial service arenas? A: Japanese managers of banks right now have a lack of decisiveness. They are quite reluctant to be the first one to initiate a merger. Now, they have no choice [but] to go for it. My policy is that more mergers should be promoted like in the U.S. with Salomon Brothers and Smith Barney and Chemical and Chase Manhattan bank. These institutions were incredibly big already. By merging, they have tremendous competitive energy. Q: How do you see the banking landscape changing? A: If the Japanese banking system doesn't change, all the banks will lose their competitive position. I would like the banks to focus more on asset management, given the $10 trillion in household savings in Japan. We could soon have U.S.-style 401(k) plans here. I think the Industrial Bank of Japan and other money-center banks will be involved in investment banking. The regional banks have special human relations with local companies and should focus on lending. Q: Some want the banks to essentially forgive loans to big borrowers. Do you agree? A: One of the options might be debt forgiveness under very special conditions. Otherwise, it might create a moral hazard. Borrowers should have a solid reconstruction plan. It will be the banks' decision, but a big debt-forgiveness plan isn't really part of our government plan. Q: Do you think banks should tie up precious capital in cross-share networks with major borrowers. A: It's true that Japanese financial institutions have excessive holdings of equities. It's a volatile and price-fluctuating asset. In the Diet, somebody asked me about a law prohibiting banks from owning equities. I would like to retain the status of letting money-center banks hold some shares. I don't think it's a good idea for regional banks to hold shares in medium-sized companies they lend to. This is kind of a unique Japanese situation. Q: How soon will the government sell off nationalized Long-Term Credit Bank and Nippon Credit Bank? A: The LTCB already has appointed a financial adviser, Goldman Sachs. It has excellent people. I'm quite confident that one financial institution, possibly a Western one, will be interested. There is one Japanese bank very interested in Nippon Credit Bank. They just weren't fast enough. That's why we had to nationalize Nippon Credit. Once the bad debts are stripped away, I think it is very possible it will be merged. They will be O.K.. Q: How are you holding up under the stress? A: This job is quite stressful, but also a lot of fun. When I went back to New York recently, I was surprised by the great changes going on in the financial industry. The same thing will happen here. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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