Major banks have revived their political donations to the ruling Liberal Democratic Party (LDP) after an 18-year interval. The move is apparently in line with the resumption of major companies' political donations to the governing party in 2014 at the urging of the Japan Business Federation (Keidanren).
Keidanren's move is highly questionable, considering that a political party subsidy system using taxpayers' money has been introduced with the aim of restraining political donations by companies and other organizations, but the major banks' moves have raised more serious questions.
The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Bank, Ltd. and Sumitomo Mitsui Banking Corp. (SMBC) extended about 20 million yen each in political donation to The People's Political Association, the LDP's fund management body. The banks explain that their donations are part of their efforts to contribute to society. However, it is hard to understand that donations to a certain political party would be useful to all of society.
Banks had refrained from extending political donations since 1998 because they received an infusion of public funds as they were feared to go under amid a financial crisis. Banks have apparently deemed that they have fulfilled their responsibility for receiving public funds after having fully repaid the money to state coffers and substantially improving their business performances.
However, banks were able to improve their business performances because they received an infusion of more than 12 trillion yen in public funds -- including over 6 trillion yen that Japan's three largest banks received -- and were exempted from paying corporate tax because they were forced to write off massive amounts of nonperforming loans.
Banks received such preferential treatment from the national government because the industry was indispensable for the daily lives of the people who support the entire economy and because banks are deemed to be of a high public nature. Since their positions in Japan's economy and society remain unchanged, their donations to a certain political party would hardly convince the general public.
The three major banks have also supported the LDP's financial basis by extending loans to the party. According to political funds reports for 2014, The Bank of Tokyo-Mitsubishi UFJ lent over 3.1 billion yen to the LDP while, Mizuho Bank and SMBC extended about 2.07 billion yen each in loans to the governing party.
Some critics point out that political donations that banks have resumed effectively constitute a partial debt waiver since the LDP can use the donations to repay its debts to the banks.
Banks make profits by lending and investing money they collect from depositors. If banks divert some of the money for political donations, it could provoke criticism from depositors who have earned little from interest on their deposits and small and medium-sized companies that must pay high interest on their debts.
There are a series of scandals involving politics and money, including one in which a former head of the Japan Dental Federation was arrested and another involving Akira Amari, minister in charge of economic revitalization, which surfaced last week.
If political donations that are suspected of distorting the fairness of politics are rampant, it would only contribute to public distrust in politics, and a backlash from bank customers including depositors would adversely affect corporate activities.