By Kaori Kaneko and Yoshifumi Takemoto
TOKYO (Reuters) – Japan should consider creating a safety net for companies that may need help surviving the hit from the coronavirus pandemic, such as airlines and transportation firms, said Heizo Takenaka, a close aide to premier Yoshihide Suga.
The Bank of Japan (BOJ) also may need to support financial institutions if they suffer huge losses from big bailouts, said Takenaka, who as economic minister battled Japan’s domestic banking crisis in the late 1990s.
But he was cautious about the idea, floated by some analysts, that the BOJ should directly inject capital into such ailing firms, arguing the central bank is already taking on private risk by buying massive amounts of exchange-traded funds (ETF).
“The reason why we haven’t seen a sharp rise in corporate bankruptcies and job losses is because measures taken by the BOJ and the government have proved effective in mitigating the immediate damage,” Takenaka told Reuters on Wednesday.
“But we can’t continue these measures forever,” Takenaka said. “There needs to be discussion on creating a framework similar to the Industrial Revitalization Corporation of Japan.”
The Industrial Revitalisation Corporation of Japan was a semi-government investment fund that invested in troubled companies between 2003 and 2007. Takenaka served as economy minister at the time when the fund was established.
Takenaka, a member of a panel overseeing the government’s growth strategy, said Japan must create rules so that decisions on which companies to rescue are not political or arbitrary.
“It is hard to draw a line on which companies are defined as infrastructure companies,” he said, on calls from some lawmakers for the government to rescue firms involved in infrastructure that is key to society.
“Major transportation companies could be defined as such. But it’s hard to draw such a line for manufacturers.”
Airlines have been among industries hit hardest by the coronavirus pandemic. Some lawmakers have floated the idea of merging Japan’s two biggest airlines – ANA Holdings and Japan Airlines Co Ltd (JAL).
Takaneka said intensifying global competition has already forced many airlines to consolidate but that merging Japan’s two major airlines was not a simple matter since competition was necessary for domestic routes.
“For example, it will be desirable for JAL to cover domestic flights and international flights to neighboring areas such as to Seoul and Taipei, while ANA to cover long-distance international flights.”
Takenaka also serves as a chairman of staffing agency Pasona Group Inc, which is a founding member of a private non-profit called Service Design whose role in a troubled roll-out of coronavirus subsidies came under scrutiny in the summer.
Lawmakers and critics questioned how taxpayer money was spent under a complex subcontracting scheme, and whether a small non-profit was a front that would protect its founder companies, which also include powerful advertising agency Dentsu Inc, from public scrutiny.
In response to the outcry, both Dentsu, which is part of Dentsu Group Inc, and the Ministry of Economy, Trade and Industry (METI) launched internal reviews of their procurement practices.
(Reporting by Kaori Kaneko, Editing by Leika Kihara and Kim Coghill)