Japan's parliament is preparing legislation this week that will empower the Resolution and Collection Corporation (RCC) to purchase a larger portion of the banking system's bad debts.
Though there are still no details how the RCC will be able to afford the bad debt buy-up, some observers say the Bank of Japan (BOJ) may provide the capitalisation needed by the company. Policymakers from the ruling Liberal Democratic Party (LDP) hope that the legislation will solve Japan's significant bad debt problem, which is believed to amount to at least 60 trillion yen (S$0.9tr).
According to LDP policymaker Hideyuki Aizawa, the RCC will be tasked to sell or securitise the financial system's bad loans within three years of purchase. The strategy's success hinges on the assumption that the Japanese economy will have recovered by sufficiently for the purchased debts to be resold.
Source: Business Times, Singapore
