Japan mulls $106b bailout fund for ailing banks
By the Editorial Desk
The Yomiuri Shimbun
Publication Date: 27-10-2008
The government in considering increasing the amount of state funds that can be injected into ailing banks and other financial institutions in the country to deal with the global financial crisis from the currently planned 2 trillion yen (US$21 billion)to about 10 trillion yen ($106 billion), sources said.
It will announce an additional package of emergency market-support measures, which will include restarting the purchase of shares held by banks as early as Monday, according to the sources.
Some lawmakers in the ruling party are concerned that the figure of 2 trillion yen, thought to be the amount the government was considering for the bank recapitalisation plan proposed in the bill to revise the Law on Special Measures for Strengthening Financial Functions, will be insufficient to prevent the deterioration of some financial institutions.
This has prompted some Diet members to propose that the government should increase the amount to 10 trillion yen in a bid to demonstrate the government's willingness to do as much as it can to steady the financial system by ensuring that domestic financial institutions stand on a firm base.
Kaoru Yosano, state minister in charge of economic and fiscal policy, said on a TV program Sunday: "The 2 trillion yen [the government currently plans as the maximum amount to be injected in the bank recapitalisation program] won't be enough. I think it will be necessary to make 10 trillion yen available, putting aside whether we actually use this sum."
The government will soon decide details of the plan, according to the sources.
Prime Minister Taro Aso discussed various issues, including measures to address the financial crisis, in a meeting with Finance Minister Shoichi Nakagawa at a Tokyo hotel Sunday evening.
As early as Monday, the government plans to announce an additional package of measures to support the market and deal with the global financial crisis.
The government announced on Oct. 14 it would temporarily freeze the selling of shares it holds as part of measures to stabilize the financial market. But it judged that it would be necessary to do more as it has been unable to prevent the recent heavy falls in the stock market, according to the sources.
Among the additional measures, the government plans to restart purchases by Banks' Shareholdings Purchase Corporation (BSPC), an organisation comprising financial institutions in the private sector, of shares held by banks. It will also ask the Bank of Japan to start buying such shares again.
The BSPC and the central bank previously purchased shares between 2002 and 2006 in a bid to hold up share prices.
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