Commentary: Japan's houses put in order

Does it matter that the top 41 executives of Dai-Ichi Kangyo, the world's largest bank, are to take a 20 per cent cut in their entertainment allowances and a 5 per cent salary reduction? Yes, if this minor event is read against the background of what we might call a difference of emphasis between Kiichi Miyazawa, the Prime Minister, and Tsutomo Hata, Finance Minister.

Japanese politicians rarely have rows, but in the past few days Mr Miyazawa has promised taxpayers' money to rescue the banks and Mr Hata has appeared to contradict him. Mr Miyazawa said on Sunday he was ready to use public funds to help banks suffering from bad property loans, by contributing to a private corporation to be set up later this year to buy property held by banks as security.

The parallels with the US Savings and Loans rescue, organised by the government through Resolution Trust Corporation, were inescapable. The implication was that the Japanese banking crisis was as bad as the most pessimistic had feared. Discreet help through the tax system was no longer enough, and direct help was firmly on the agenda.

However, Mr Hata confused the issue yesterday, saying that his ministry was not considering any such plan, and that setting up a company to buy property was 'wholly up to the private sector'. The explanation, according to Japanese economists, is that the two men are talking different timescales. The Finance Ministry denies a taxpayer bail-out is on the agenda, perhaps partly because it would heighten the sense of crisis. Mr Miyazawa is promising help for the property purchasing company, but only after the banks put their own houses in order by cutting their bloated costs. So it was no coincidence that within hours of the two statements, DKB executives were putting their expense accounts on the block.