Facing The Inevitable In Tokyo

A financial panic in Tokyo that sent thousands of depositors storming into the city's biggest credit union, the Cosmo Credit Corp., has finally set the stage for a massive government bailout of the Japanese financial system. The public's concern for its own deposits has begun to outweigh the popular indignation against bubble-era bankers who got themselves--and the country--into deep financial trouble by lending to politically connected companies and their own ventures.

The timing couldn't be better. The yen, thanks to intervention from the U.S. Federal Reserve, has moved significantly lower in recent weeks. This should give a lift to Japanese corporations and the economy. At 85 yen to the dollar, few Japanese companies had any profits. At 90, many do.

The current financial crisis is yet another example of how delaying bureaucrats seriously hurt the Japanese economy. First, the regulators created the problem by encouraging financial institutions to lend wildly in the 1980s for high-risk real estate deals. Much of the money was funneled to politicians and their corporate cronies. Then, in the 1990s, bureaucrats at the Finance Ministry and Bank of Japan denied there was a problem, ignoring all evidence to the contrary. Now, a bailout may cost up to $230 billion, more than what the U.S. spent on the savings and loan debacle.

Now the government will have to spend billions to bail out credit unions, housing-loan and agricultural co-ops, and eventually the big commercial banks. Americans, who have had to bail out their own savings-and-loan institutions, can only sympathize with the huge task at hand in Japan. But the sooner the authorities begin, the quicker Japan can return to normal economic growth.

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