Word: takenaka
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Since Heizo Takenaka was appointed Japan's Financial Services Minister five weeks ago, he's been remarkably blunt about what was needed to straighten out the country's overextended, reform-proof banks, those black holes that continue to suck the life out of Japan's economy. A hard landing was required, he said. Hopeless loans?Xthere are at least $420 billion worth of them?Xhad to be sold off on the cheap or written off once and for all. In addition, the government would have to take over banks that were insolvent by any definition other than that of wishful...
...evening release of his preliminary proposals, those grumblings turned into a revolt. On Tuesday morning, Liberal Democratic Party (LDP) heavyweights Mitsuo Horiuchi, Taro Aso and Taku Yamasaki vowed to intervene. While Koizumi briefed the emperor at the Imperial Palace that evening, the three leaders and other LDP bosses confronted Takenaka behind closed doors in the Diet building. Takenaka left the meeting looking visibly pale. "This was poor leadership from Koizumi," says Mamoru Yamazaki, chief economist at Barclays Capital Management. "Takenaka was accused by the leading politicians of the Diet, and the Prime Minister wasn't protecting him." That evening, Takenaka...
...loans more rigorously and boost the percentage of total capital they must keep on hand to safeguard against potential delinquencies. Second, the plan seeks to tighten capital accounting rules: banks today are booking the expected income from deferred tax assets as up to 40% of their core capital, but Takenaka wants to force them to lower that amount to 10%. Either of these measures would force many banks into violation of their mandated 8% capital adequacy ratios. This would allow the government to seize control, dispose of bad loans and restructure as it sees fit?a terrifying threat...
...Koizumi's opponents are worried about a host of factors, including what they deem a "Takenaka Recession." Under the finance chief's plan, the easy pipeline of money from complacent banks to profitless companies would be cut off, giving these companies no choice but to shut down and throw their workers out on the street. "Companies are going to go under and Japan offers no support for the unemployed," frets Minoru Morita, a prominent political analyst. Already, LDP politicians and Tokyo bankers are circulating a list of 51 companies presumed likely to meet with peril under the plan?including retailer...
...last, best hope of being remembered as a great reformer. "If the latest round goes down poorly, Koizumi will very quickly start thinking about how to make an exit that preserves his political viability," predicts Gary Saxonhouse, a professor of economics at Princeton University and a friend of Takenaka's. "Very soon, you might have a different Prime Minister or you are going to have a eunuch running the Japanese government...