Japan Airlines: A Broken Resolution

The run-up to New Year is a time to tidy up loose ends in Japan so that in January everything starts afresh. For a fleeting moment, it looked as if the government was doing just that when, after months of indecisiveness, it hinted on December 30th that Japan Airlines might be headed for bankruptcy, The Economist reported in a commentary. But after the shares slumped by 24% to an all-time low on the same day, ministers lost their nerve over sanctioning what could be one of Japan’s biggest corporate failures. Despite strong differences of opinion within the government a new support package was cobbled together over the holiday weekend, doubling the state-run Development Bank of Japan’s credit line to JAL, as the airline is called, to 200 billion yen ($2.2 billion). Letting JAL go bankrupt would send a strong signal that the new government was curbing the long-standing practice in Japan of throwing good money after bad. That would reassure voters. However, the ruling Democratic Party is also keen to win upper-house elections this summer, and unions—eight of which are involved with JAL—are important supporters. The bottom line is that the government will add its own complicated political interests to those of the airline’s customers, investors and creditors. Bankruptcy would be a neater and ideologically sounder solution. Read more.