Prime Minister Junichiro Koizumi's efforts to streamline inefficient public corporations have been largely successful so far. But he has suffered a setback in one important category of these corporations: state-run financial institutions. Faced with stiff resistance from both inside and outside the government, the prime minister has put off a decision on what to do with these public banks, including People's Finance Corp.
The crushing burden of public debt is part and parcel of Japan's economic crisis. The central and local governments combined owe a staggering 660 trillion yen or more, a sum that exceeds gross domestic product by 30 percent. The private sector is also stuck in a quagmire of debt, as epitomized by an enormous bad-debt overhang that is blocking banks' normal lending activity. Fixing the debt problem is one of the principal aims of Koizumi's program of "structural reform with no sacred cows." That is one reason why he is supported by the majority of the people.
The government's decision to streamline 163 public corporations, not including eight financial institutions, is based on the belief that the existence of these deficit-ridden entities is contributing to the public-finance crisis. That decision is also underscored by the realization that the bloated public sector is a drag on growth and development in the private sector. It is these basic assumptions that are propelling efforts toward public-sector consolidation. Of the 163 organizations involved, 17 will be dissolved and 45 others privatized.