Dogs and Demons_ Tales From the Dark Side of Japan - Kerr [68]
To understand how the monument frenzy can continue at fever pitch, we need to take another look at how these projects are funded. Where do the bureaucrats get their money? They get it from Zaito, or FILP (Fiscal Investment and Loan Program). Zaito is Japan's second budget, the shadow budget, through which MOF's Trust Fund Bureau draws on a huge pool of deposits in the postal-savings system to fund its agencies and programs-with almost no parliamentary overview. Zaito is the bureaucracy's private piggy bank.
Zaito works like this:The government grants tax exemptions and other preferential treatment to postal-savings accounts managed by local post offices; interest on postal-savings deposits is consistently higher than in the private sector. Lured by these higher interest rates and by the convenience of banking at post offices, the Japanese people have put more and more of their money into postal savings, to the extent that by the end of the twentieth century they accounted for about a third of all bank deposits in Japan.
This enormous pool of capital – trillions of dollars' worth – is handed over to MOF's Trust Fund Bureau to manage. With the funds from postal savings, pension funds, and other special accounts combined, the Trust Fund Bureau has, in effect, become the worlds largest government bank. It invests much of the money in Japanese government bonds, which helps to explain why these bonds, which paid interest of only 1 to 2 percent or less for most of the 1990s, still found buyers – or, at least, one large buyer, the government itself, using captive savings deposits managed by the Trust Fund Bureau.
With money like this at its disposal, how could MOF resist the temptation to dip into the honey pot? It didn't take long. In 1955, only three years after the American Occupation ended, MOF borrowed a little money from the Trust Fund Bureau to support certain items for which there was not enough allocation in the general budget; the purpose was obviously to get around the official budget process in the National Diet.
It worked all too well. By 1999, Zaito borrowings had skyrocketed to ¥52.9 trillion annually, including ¥39.4 trillion overseen by the Trust Fund Bureau and another ¥13.5 trillion lent by the Postal Life Insurance system. In 1999, the ¥52.9 trillion Zaito program amounted to two-thirds of the money disbursed in the official «first budget.» The beauty of Zaito, from MOF's point of view, is that it flows from an inexhaustible pool of public savings and is largely invisible to politicians and the press. So far so good. The problem is that the people who manage Zaito are the same «brilliant, creative, tenacious, public spirited» MOF men who have run Japanese banks into the ground. With an endless supply of money at their disposal and no public accountability, the fifty-seven tokushu hojin and other agencies on Zaito support have racked up debts as they have spent trillions on all these wasteful monuments and shell agencies supporting ex-bureaucrats.
When these corporations and agencies found themselves unable to repay their Zaito borrowings, the tobashi started.
Tobashi, or «flying,» is a word we have met before as the term used by banks to describe the method whereby they pass bad loans on to subsidiaries, thus causing them to «fly» off the books. In the case of Zaito, MOF lent more money to Zaito borrowers to cover the interest payments. By 1997, troubled Zaito loans were estimated to be as high as ¥62 trillion, although even this is a conservative figure. These Zaito obligations, added to the cumulative deficits of the central and local governments, the «hidden debts» (such as ¥28 trillion for the old Japan National Railroad Resolution Trust), and the juggling of inter-governmental accounts, raise Japan's