Subnational government needs are regarded as short term. In sum, the Trust Fund Bureau will not be in a position to lend money to prefectural and local governments in FY 2000. Even if the Finance Ministry could finesse the legal hurdles that stand in the way of issuing government securities to raise money for this unconventional purpose, the short-term government securities market in Japan remains underdeveloped. A recent study by the Organization for Economic Cooperation and Development found that only 5 percent of outstanding Japanese government debt had an original maturity of one year or less in 1997 versus a comparable figure of 21 percent for the United States. Thus, borrowing is Tokyo's default option.
Commercial banks are the obvious choice for lending the massive amounts involved.
Moreover, MOF insiders insist that banks will make competitive bids for the right to provide this money. They also claim that published reports that the government will pay a relatively high interest rate or that the borrowing costs already have been set simply are incorrect. However, MOF is equally known for its lack of transparency, particularly with respect to budgetary and financial matters. As such, few analysts are surprised that the ministry's motives on an issue that involves both financial institutions and budgets would be questioned.