Japan bank minister says repayment halt good for banks

September 18, 2009

Japan's newly appointed Financial Services and Postal Services Minister Shizuka Kamei speaks during a news conference at the prime minister's official residence in Tokyo September 16, 2009.   REUTERS/Issei Kato By David Dolan and Noriyuki Hirata
TOKYO, Sept 19 (Reuters) – Japan’s new banking minister said his plan to freeze the repayment of bank loans to help debt-burdened individuals and small companies would be a positive for the banks, even as investors have fled financial stocks.

Shizuka Kamei, the 72-year-old head of a tiny coalition partner of Japan’s new ruling party, also told reporters that investor concern about the plan was a sign of “weakness”.

A veteran politician and outspoken critic of U.S.-style capitalism, Kamei took office this week as financial services minister following the ousting of the long-ruling Liberal Democratic Party.

But his plan to give cash-strapped borrowers a three-year grace period when they would not have to repay the principal on a loan or mortgage has rattled investors.

“To think that we would cause trouble for banks by helping their customers, that’s just strange. This is also good for banks,” Kamei told a group of reporters in his office in Tokyo on Friday.

The Tokyo share market’s banking sector index is down about 3 percent since Kamei was named as the next financial services minister.

“That just goes to show the weakness of the financial sector,” Kamei said when asked about the market’s reaction.

“If the financial world gets scared at the talk of a moratorium, that shows how frail Japan’s financial sector is.”

Kamei has said that he wants to introduce a bill for the repayment moratorium next month. He has yet to decide on a means of enforcing it, among other details, he said on Friday.
Kamei said ahead of the meeting of G20 leaders in Pittsburgh next week which is expected to focus on financial regulation that any regulatory overhaul in Japan must take into account the circumstances in the world’s second-largest economy.

“Japan has its own circumstances,” he said. “Although we will do our best to meet global standards.”

Kamei has previously said that he will not be a “yes man” to the United States on regulation.

Regulators around the world are moving to tighten rules on banks following the credit crisis, asking lenders to boost their capital buffers in order to prevent another meltdown.

However, Japan is concerned the recent emphasis on core Tier 1 capital — an increasingly watched measure of a bank’s financial strength — will be unfavourable to Tokyo’s biggest banks.

A former police official with a sixth-degree black belt in the martial art of aikido, Kamei has been a blistering critic of a financial system that he says has gone too far, and abused the common man.

“The govenment bails out lenders with taxpayer money, so it makes sense that there should be a moratorium for borrowers when they get into trouble. We have to think about the borrowers, not just the lenders,” he said.

Kamei has spent much of his recent career criticising former prime mininster Junichiro Koizumi and his pro-market agenda. Kamei left Koizumi’s Liberal Democratic Party in 2005 and founded the small People’s New Party to oppose a plan to privatise Japan’s post office system.

Kamei’s ministerial portfolio now includes the postal system, which holds $1.8 trillion in household deposits. He has said that he aims to halt its privatisation.

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