25 October 2008

Japan to resume buying shares from banks

The Japanese government has decided to ask the Bank of Japan to start buying shares held by the country's banks as a way to help stabilize financial markets, the Nikkei business daily reported.

The Japanese government has decided to ask the Bank of Japan to start buying shares held by the country's banks as a way to help stabilize financial markets, the Nikkei business daily reported.

 

Other measures being considered include having the government's Banks' Shareholdings Purchase Corp resume buying shares and raising the 2 trillion yen ($20 billion) limit for the bank recapitalization program, the Nikkei said, adding that the steps could be announced as soon as early next week.

 

"In addition to those steps, the fresh stabilization plans likely include introducing stricter regulations for stock trading, setting more flexible fair value accounting rules and revising the capital ratio requirements for banks," it said.

 

"By presenting an array of policy measures and highlighting its willingness to tap all available resources, the government seeks to alleviate mounting concerns about the stock market and financial institutions," the Nikkei said. The Banks' Shareholding Purchase Corp was set up in 2002 with the aim of helping to revive the Japan's stressed banking sector, burdened by bad loans after a decade-long 1990s recession and bursting of the tech bubble in 2002.

 

The government announced a series of market stabilization measures on Oct 14, including temporarily suspending sales of government-held shareholdings. Now it believes that additional steps are needed to prevent further erosion in securities and financial market conditions, the Nikkei said.

 

Tokyo's Nikkei share average fell 9.6 percent on Friday to its lowest close in more than five years as exporters were hit by a soaring yen and Sony Corp more than halved its annual operating profit forecast.

 

Japan's government is compiling another economic stimulus package, expected to be unveiled next week that will include 2 trillion yen in temporary income tax cuts, a bank bailout scheme and relief for small businesses. Media reports have said the package would be worth a total of 5 trillion yen in new spending.