The government should inject public money into financial institutions through the issuance of special bonds to protect depositors and insurance policy holders in the event of a financial collapse, a think tank affiliated with the Japan Federation of Economic Organizations (Keidanren) proposed Friday.
According to the proposal by the 21st Century Public Policy Institute, which was established in April by Keidanren, a special account for troubled institutions should be created and it should be kept separate from the government's general account to ensure the transparency of the flows of public money.
Within the framework of the supplementary budget for fiscal 1997, the government should first issue 2 trillion yen worth of special bonds and eventually create a scheme that allows the government to issue up to 10 trillion yen worth of special bonds when necessary, it said.
Naoki Tanaka, an economist and the president of the institute, said that without an injection of public money, surviving financial institutions will have to accept the added burden of the collapsed financial institutions through increased deposit insurance premiums and share out any financial burden among group companies. "This situation is peculiar to Japan," Tanaka said. "Those that survive will be forced to conduct their business in a very inefficient way, and they will not be able to survive the upcoming 'Big Bang' reforms of the financial sector."