The article discusses steps taken by the Bank of Japan to spur the Japanese economy. In addition to lowering its policy interest rate, the bank has reaffirmed its intention to keep interest rates down and suggested it might begin forcing money into the economy by purchasing corporate bonds, commercial paper, and other assets from banks.
The article focuses on the dilemma facing the Ministry of Finance in Japan regarding the banking system. The Ministry is having a hard time dealing with the banking system's problem. It has recommended to use public money to clear the debt of banks but tax papers would not agree to such an idea. They hate the idea of subsidizing strong banks like Daiwa Bank. The Ministry, to be fair, does not have any plan to give money to bankers but only to depositors at risks. The catch, however, is that some of the depositors are strong banks. It is suggested that depositors should be bailed out by an expanded deposit-insurance scheme. In return, banks are required to disclose information about their debts.
Published
1995
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