TOKYO – After the agreement reached in the night of yesterday between the ruling Liberal Democratic party and the opposition to get out of the quagmire of the financial crisis, the archipelago’s banking system has entered an effervescence. The Long-Term Credit Bank (Ltcb), the banking giant that is about to be nationalized, has resigned itself to the failure of Japan Leasing, a branch that would have accumulated debts for about 30 thousand billion lire. At the same time two of the major Japanese banks, L’Ashai bank and Tokai bank, announced an ambitious merger project.

This is an earthquake in the Japanese banking landscape. But it seems they are only the first shocks. The “la” to the small revolution started last night thanks to the agreement between the majority and the opposition for the reform of the banking system. The agreement was reached after a whole weekend of negotiations that should pave the way for the approval of the reform in parliament. The agreement provides for the reform to be managed by a new independent body and the Ministry of Finance. Furthermore, any acquisition by another bank in a bankruptcy institution will be entitled to a capital injection with public funds. All this will allow the temporary acquisition by the State of the banks in crisis, whose actions will then be resold to individuals once the problems are solved.
. Japan Leasing is one of the three financial companies controlled by the LTCB, the bank in the most precarious conditions in the Japanese financial landscape, overwhelmed by a mass of bad debts that the government of Prime Minister Obuchi has committed to rehabilitate. This morning, the parties confirmed the temporary nationalization of the Long term credit bank, which controls Japan Leasing and whose stock on the Stock Exchange crashed to an all-time low of 13 yen compared to almost 400 of seven months ago.
The governmental party has also agreed to cancel a law approved only this year that allocated 13,000 billion yen (over 160 thousand billion lire) to be directly entered in the budgets of the banks. However, the use of public money to save credit institutions is a principle that should be confirmed by a new law, even if it will not be indiscriminate but will have to respond to more selective criteria. “We are aware of the need” of public funding, said Naoto Kan, leader of the largest opposition group, the Democratic Party of Japan (DPJ), which in recent weeks had fought against the use of public money, preferring nationalization and the possible liquidation of the most compromised banks.

Meanwhile, to survive the storm hit the Japanese financial system, the medium-sized banks Tokai and Ashai have decided a strategic marriage that will give life to a new financial giant. The two institutions, respectively in the seventh and eighth places in terms of size in the Japanese financial landscape, could in the future also come to a merger. With 61.21 trillion yen of assets they would become the second financial entity, behind only the Tokyo-Mitsubishi bank.