Economy-Finance

Japan econ minister: govt should expand bank bailout plan

TOKYO, Oct 26 (Reuters) – Japanese Economics Minister KaoruYosano said on Sunday the government should increase its bankbailout scheme to around 10 trillion yen ($106 billion) fromtwo trillion yen.

“Right now we can use two trillion yen. But that’s probablyinsufficient… Whether we’ll use or not, we should have about10 trillion yen on the table,” Yosano said in a TV Asahiprogramme.

His comments came after Japan last week came up with a planto inject up to two trillion yen of public funds into banks tofight the global financial crisis, which roiled markets andthreatens to tip the developed world into recession.

Although Japanese banks have been relatively unharmed bythe credit crisis, the plunge in Japanese shares in the pastfew months is threatening their balance sheets as they hold aconsiderable amount of Japanese stocks.

Japanese share prices fell to a 5-½ year low on Friday,having lost half of their value so far this year, on investorworries that Japanese corporate earnings could evaporate on arise in the yen and a severe slowdown in the world economy.

Japan’s business daily Nikkei reported on Sunday that thegovernment will announce additional steps to stabilisefinancial markets before they opening on Monday.

The paper reported on Saturday that the measures willinclude a government body buying banks’ stock, changes inmark-to-market accounting and the strengthening of a ban onshort-selling.

The business daily also said the government plans to askthe Bank of Japan to buy shares from banks, resuming aprogramme the bank had in place between 2002 and 2004.

The Nikkei said the size of such share-buying schemes hasnot been decided yet.

Banks’ Shareholdings Purchase Corp, which the governmentset up in 2002 when Japanese banks were creaking under amountain of bad loans to Japanese companies, bought a total ofabout 1.6 trillion yen worth of shares from 2002 to 2006.

Similarly, the Japanese central bank bought about 2trillion yen in shares from 2002 to 2004.

These purchases were aimed at reducing pressure on Japan’sstock market as banks were trying to offload part ofcross-shareholdings between banks and their customers whichwere intended to strengthen business ties between them. ($1=94.27 Yen) (Reporting by Hideyuki Sano; Editing by Jan Dahinten)