Japanese Taxpayers Cry Foul Over Another Government Miscue

Better late than never, the Japanese government may say. But taxpayers are screaming bloody murder about another government miscalculation that has cost them a cool $3.6 billion.

The latest contretemps are over Osaka-based

Namihaya Bank

, a 10-month-old creation of the elites at the

Financial Reconstruction Commission

that was declared insolvent this past Saturday and applied for nationalizaton.

That small Japanese banks, sitting on bad loans extended during the go-go era of the

Bubble Economy

, are still struggling isn't news to anyone. That Japan's finance mandarins haven't learned in five years that throwing good money after bad still makes no economic sense, and bodes ill for an industry that once towered over its international rivals, is.

Rather than letting a bank go under, something the government has pledged it won't allow, regulators reached further into government coffers, already the most unhealthy among the developed world, and poured 300 billion yen ($2.6 billion) into

Fukutoku Bank

and

Naniwa Bank

. The new institution became the fourth Japanese bank to walk the road to nationalization in less than a year, joining the ignominious short list that includes

Long-Term Credit Bank of Japan

,

Nippon Credit Bank

and

Tokyo Sowa Bank

.

"The government admits it made a mistake," says one

Ministry of Finance

official, who spoke to

TSC

on the condition of anonymity. "But it definitely can't keep making the same mistake."

It certainly can't.

The Japanese public, sick of seeing fat cats grow fatter, has used bankrupt Namihaya as a rallying call. Newspaper editorials have decried the government's obvious lack of sense, while television talk show hosts have vented their spleens with diatribes against the bureaucrats' handling of the affair.

Shares in the bank, which will continue to trade for the three months its application requires for processing, quickly -- and unsurprisingly -- slid nearly 90%. If it follows the examples set by LTCB and NCB, it will be trading at 1 or 2 yen in swift time.

The government, for its part, has apologized to the public and admitted it has taken on about 110 billion yen of Namihaya's liabilities, raising the ultimate cost to the taxpayer. To the chagrin of bureaucrats, some of this had been hidden through the practice of

tobashi

, accounting legerdemain that temporarily transfers non-performing assets to a subsidiary or friendly firm.

Looking back, it wasn't the perfect response, a contrite

Vice Finance Minister Nobuaki Usui

told reporters on Monday in an understatement that likely produced snickers in pubs and living rooms nationwide.

And it was even less so considering that the country has come close to draining the

Deposit Insurance Corp.

, Japan's increasingly busy version of the

Federal Deposit Insurance Corp.

, which protects depositors. Like the government itself, the DIC said a few weeks ago it needed more money and would tap the markets for credit.

The government's profligate ways will likely be remembered when it announces yet another economic stimulus package to keep the economy from slipping back into a coma. And it will certainly be remembered in the next election.