Print

Mail

wiki links

Bank of Japan ready to provide funds

Japanese central bank governor Masaru Hayami signaled the bank may provide more funds to the money markets in case the government fulfills promises to speed up bad loan write-offs.

The bank will support "efforts to overcome the bad-loan problem quickly and stabilize the financial system," Hayami said in a speech to the bank's regional managers. "The Bank of Japan will continue to do its best to stop continuous price declines."

Hayami has been urging the government of Prime Minister Junichiro Koizumi to speed efforts to clear some of the ?52.4 trillion (US$419 billion) of bad loans that are clogging the banking system, depriving the world's second-largest economy of the fresh credit it needs to expand.

Heizo Takenaka, Japan's new top banking regulator, will release a draft bad-loan plan Tuesday, and the government will incorporate it in a package of anti-deflation steps due out Friday, a ruling Liberal Democratic Party official said yesterday.

Hayami today also repeated pledges to pump more money into the economy "regardless of its reserve target, if there is unstable movement in financial markets."

Providing more money to banks may ease the pain of bad-loan writeoffs, which are expected to tip companies into bankruptcy and drive up unemployment as lenders cut off deadbeat borrowers.

"The central bank may move, as early as at its next board meeting on Oct. 30, to expand its monthly bond purchases and raise its reserve target," said Yasunari Ueno, chief market economist at Mizuho Securities Japan Ltd.

The central bank may expand bond purchases to about ?1.2 trillion, investors said. It makes ?1 trillion of outright purchases of government bonds from lenders each month and makes as much as ?15 trillion in reserves available to banks. The central bank has kept interest rates near zero since March last year.

The central bank may also provide funds to the state-backed Resolution and Collection Corp to accelerate its purchases of bad loans from banks, investors said.

Japan's Nikkei 225 Stock Average has fallen 14 percent this year, raising concerns some banks and insurers may fall into insolvency when they close their books at the end of the fiscal year.

The central bank last month announced an unprecedented plan to buy ?2 trillion in stocks from lenders to help them cut losses when stocks decline.

Hayami also said yesterday that although the Japanese economy has "stabilized" on the whole, the bank hasn't seen clear signs of recovery in the economy as global growth is slowing and Japan's prices continue to fall.

exports

Company executives in the Osaka region, Japan's second largest industrial area, are worried that exports and production would lose steam as global growth slows, said the head of the central bank's Osaka branch.

Osaka-based executives want the government to soften the blow of bad-loan disposals by stimulating consumption, said Eiji Muto, the Osaka branch manager.

"Businesses hope the government will provide drastic tax cuts or implement public-works projects," Muto said.

Muto said he hasn't heard calls from businesses to inject more money into the economy.

The Osaka region, with an economy as large as that of the Netherlands, is home to some of Japan's biggest exporters, including Matsushita Electric Industrial Co, Sharp Corp and Sanyo Electric Co.

Japanese banks and credit cooperatives are also becoming cautious about lending to companies as they come under pressure to get rid of bad loans, Muto said. Japan's bank lending hasn't grown in six years.
This story has been viewed 2397 times.