AMPONTAN

Japan from the inside out

Ichigen koji (99)

Posted by ampontan on Thursday, April 19, 2012

一言居士
– A person who has something to say about everything

One experience I’ll never forget. Soon after I became the Minister for Internal Affairs and Communications (October 1005), I tried to reform the way that local government bonds were issued (by municipalities and prefectures).

Though I call it a reform, it wasn’t anything special — I just wanted to do something that everyone else takes for granted. When companies float bonds to procure funds, the rate they pay will of course differ for Company A, which has strong revenue and earnings, and Company B, whose performance is weak. The risk of lending money to Company A is low, so the interest earned will be low. In contrast, the interest will be higher for Company B.

But when cities and prefectures issue bonds (in Japan), the solicitation is done through a financial institution selected by the national government, and the interest rate for procuring the funds is the same for every city and prefecture.

People who hear about this for the first time are probably surprised. This is the very definition of government-led collusion. It’s terrible, and it is probably enough for the Fair Trade Commission to issue an order prohibiting it.

As the Minister for Internal Affairs, I was responsible for fiscal matters related to local governments. I tried to stop it immediately. But not only were the bureaucrats opposed, many local governors and mayors were also upset. If the collusion fell apart, all of their problems would be exposed.

– Takenaka Heizo, Koizumi Jun’ichiro’s privatization guru

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