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Japan Deposit Insurance Proposal Draws Criticism

Shunichi Nagata, governor of the Deposit Insurance Corporation of Japan (DICJ), speaks during an interview in Tokyo, April 14, 2010. Photographer: Tomohiro Ohsumi/Bloomberg
Shunichi Nagata, governor of the Deposit Insurance Corporation of Japan (DICJ), speaks during an interview in Tokyo, April 14, 2010. Photographer: Tomohiro Ohsumi/Bloomberg

April 20 (Bloomberg) -- Deposit Insurance Corp. of Japan said a government proposal to increase deposit insurance could prove costly and unnecessary.

“Japan’s deposit guarantee of 10 million yen ($109,000) per person is one of the best in the world,” Shunichi Nagata, governor of the state-backed agency, said in an interview in Tokyo on April 15. “I don’t think circumstances warrant an increase in the guarantee.”

Financial Services Minister Shizuka Kamei said on April 2 that he’d consider boosting deposit insurance so Japanese savers don’t desert private banks and credit unions for the relative safety of government-owned Japan Post Bank Co. The proposal could force the DICJ to raise fees paid by the very lenders that the minister wants to support, according to Nagata, 66.

“If you increase the deposit insurance guarantee, naturally, you would have to increase the premiums banks pay, unless some other circumstances change,” said Nagata. At the same time, the DICJ is ready to consider reducing premiums as the corporation’s balance sheet recovers from bank failures in the last decade, he said.

Prime Minister Yukio Hatoyama has endorsed a separate plan by Kamei to allow the postal bank to double the amount of deposits it can take from customers. The Japanese Bankers Association said on Feb. 23 it’s worried that allowing the state-owned bank to take deposits of as much as 20 million yen per customer may spark an outflow of funds from private banks, particularly small regional lenders.

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Kamei said April 2 it may be possible to raise the deposit guarantee, while at the same time lowering premiums.

Nagata declined to comment on changes at the postal bank or say how much the DICJ may raise fees if deposit insurance is increased. Japanese individuals have on average about 3 million yen in savings, according to the bank association.

Deposit-taking financial institutions currently pay an annual premium equivalent to 0.084 percent of their deposits to the DICJ to fund the guarantee. The guarantee covers individuals for as much as 10 million yen at each bank or credit union where they hold an account.

The U.S. Federal Deposit Insurance Corp. will return its guarantee for accounts to $100,000 in 2014 after lifting it to $250,000 in the wake of the subprime mortgage crisis, according to its Web site. The U.K.’s guarantee is 50,000 pounds ($76,000), according to the nation’s financial regulator.

Kamei plans to restructure Japan Post Holdings Co., which includes the post bank, into three companies from five from October 2011, he said at a briefing in Tokyo today.

To contact the reporters on this story: Finbarr Flynn in Tokyo at; Shingo Kawamoto in Tokyo at

To contact the editor responsible for this story: Philip Lagerkranser at

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