The Ministry of Economy, Trade and Industry, which oversees Shoko Chukin Bank, a public financier specializing in loans to small businesses, plans to phase out government funding of the institution and to privatize it, METI Vice Minister Hideji Sugiyama said Monday.
Shoko Chukin is one of eight government-backed financial institutions being considered for privatization under Prime Minister Junichiro Koizumi's structural reform drive.
Sugiyama told a news conference METI will aim to transform the bank into "an entity run without government investment" at some point in the future.
METI chief Toshihiro Nikai has said the government will try to achieve the full privatization of Shoko Chukin but stopped short of commenting on whether funding will continue.
The bank, about 80 percent of whose capital comes from the state, is supervised jointly by METI and the Finance Ministry.
The government has agreed in principle with the ruling parties on the goal of consolidating the eight government-linked institutions into a single entity. The Council on Economic and Fiscal Policy is expected to finalize basic policy on streamlining the institutions in a meeting Tuesday.
Sugiyama, however, emphasized Monday that a transition period should be set before the full privatization of Shoko Chukin so that borrowers' businesses will not be severely hurt.
"The point is that we should maintain a system under which the new, privatized entity can procure funds at low cost and extend loans to meet policy needs," Sugiyama said.