Entering the Sumo Ring.(Sadakazu Tanigaki)(Interview)

Of all the fresh faces in Japan's new cabinet, Sadakazu Tanigaki's is the most likely to sport a black eye or two sometime soon. As head of the powerful Ministry of Finance, he's fighting to shore up Japan's shrinking tax base, fund a massive pension scheme saddled with a staggering $4 trillion shortfall, support corporate restructuring and rationalize social-welfare spending--all from within a bureaucracy that built Japan's failed economic system and traditionally has opposed radical reforms. He knows the challenges, both from his stint as a parliamentary finance vice minister in the mid-1990s and more recently as head of the new Industrial Revitalization Corp., which rehabilitates weak companies. He spoke with NEWSWEEK's George Wehrfritz and Hideko Takayama in Tokyo last week. Excerpts:

NEWSWEEK: "Convoy capitalism" has long been your ministry's trademark. Are the days when Tokyo supported banks and industry by preventing large-scale bankruptcies over?

TANIGAKI: When I served as a parliamentary vice finance minister we saw the failures of the Long-Term Credit Bank and Nippon Credit Bank. At that time the convoy system was already becoming a thing of the past. To abolish it we needed a structure to handle [corporate] failures, but we had insufficient mechanisms at our disposal. Five years later, we have mechanisms to deal with failures.

The Daiei retail chain is reportedly set to seek a debt bailout for the second time in less than two years. If that happens, will you rubber- stamp a deal as the ministry did in the past?

I do not have enough information to comment on individual businesses. However, I see that it would be very difficult for any business to be revived solely reliant on debt forgiveness. Further strategies are needed to create value.

Would you welcome more foreign investment in Japan's financial sector?

We cannot but go along with the principle of nondiscrimination between foreign and domestic investors. This is the way to go.