Japan Eases Role of Taxpayers in Bailout

In a move to reduce taxpayers’ burden in an unpopular bailout of failed housing lenders, Japan’s central bank said Wednesday that it will contribute about $910 million to a new fund to help dispose of the bad loans.

The government earlier had set aside about $6.2 billion in taxpayers’ money to help clean up the debt problems of seven housing lenders. Proceeds from the new fund are intended to replace some of the taxpayer funds.

Private banks have agreed to put up about $5.9 billion and agricultural financial institutions about $1.4 billion toward the fund. Life insurance companies and securities houses that played a part in establishing the housing lenders are also expected to contribute.

The fund is to invest most of the donations and use the proceeds to help with the debt cleanup.

The Bank of Japan said its contribution will be used to purchase preferred shares and loans of financial institutions in need of assistance. It said it has no plans to contribute further to the fund.

As part of the bailout, a government-backed agency was set up in July to try to collect money owed to the housing lenders, called jusen.

The new Housing Loan Administration Corp. is taking over all outstanding loans from the jusen. It will be foreclosing on real estate held by speculators, bought mostly when land and stock prices were booming in the late 1980s.

When prices crashed in the early ‘90s, many developers defaulted on their loans and abandoned building projects, leaving Tokyo and other big cities dotted with parking spaces and empty lots in prime locations.

The jusen made loans worth nearly $118 billion, but about half that amount has already been given up as unrecoverable.