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Japanese minister backs BOJ policy

Bad signs * On Friday the Nikkei-225 stock average fell to its lowest level in two decades. * Japan has spent ?2 trillion (US$17 billion) since January to curb the yen's strength. * Politicians believe the government must spend more to support the economy as banks accelerate bad loan write-offs, which could result in further company bankruptcies and job losses.

Japan's top financial regulator backed the argument that the Bank of Japan should buy stocks, land and exchange-traded funds (ETFs) if stock prices keep plunging.

"I am for it in the sense that [the central bank should] take drastic measures," Financial Services and Economy Minister Heizo Takenaka said on a Japanese talk show yesterday.

Takenaka was referring to the remark by Hiroshi Okuda, head of the Japan Business Federation or Nippon Keidanren, on Friday after the key Nikkei-225 average fell to its lowest level in two decades.

Finance authorities and the Bank of Japan would need "a considerable resolution" if the Nikkei index falls far below the 8,000 mark, the Japanese media quoted Okuda as saying in Berlin.

Okuda, also chairman of Toyota Motor Corp, was in Germany on the business lobby's European mission.

Though he agreed with Okuda, Takenaka stressed he would not tell the central bank what items it should buy to guarantee its independence from the government.

In Tokyo on Friday, the Nikkei-225 index sank 225.03 points, or 2.68 percent, to 8,144.12, as fears of a war in Iraq mounted hours before a crucial UN Security Council meeting.

The close was the lowest by the benchmark Tokyo Stock Exchange since March 15, 1983, when it hit 8,111.83.

Asked if the government will act to prop up stock prices ahead of the end-March closing of account books, Takenaka said: "In principle, it is impossible to take measures to boost stock prices."

But he said that Japan's stock market was also suffering from "various distortions."

"We will correct crooked parts in its structure," he said without elaborating.

In February 2002, the government's Financial Services Agency introduced tighter regulations on short-selling after punishing a string of foreign investment banks for breaking the securities law. Share prices have risen sharply since the new rules were introduced.

Speaking on another private network Fuji, the ruling Liberal Democratic Party's Secretary General Taku Yamasaki also supported Okuda's idea, and suggested there may be a supplementary budget to the ¥81.8 trillion (US$693 billion) spending package for the new financial year from April.

"There may be room for considering [extra spending] as a future issue," he said, just five days after the initial budget bill cleared the lower chamber of parliament.

The budget includes record planned bond issues and the first rise in initial spending estimates for three years.

But some politicians believe the government must spend more to support the economy as banks accelerate bad loan write-offs, which could result in further company bankruptcies and job losses.

Meanwhile, an economic daily reported Sunday that the Japanese government and Bank of Japan have spent about ¥2 trillion (US$17 billion) since January to curb the Japanese currency's strength and help exports.

Yen selling rose as authorities fear that a strong yen may damage exports such as cars and electronics, which could be the driving force of Japan's economic recovery, the Nihon Keizai Shimbun said.

On Friday when the dollar slid below ¥117 abroad, hitting the lowest point since last August, the Japanese authorities spent several hundreds of billions of yen (several billion dollars) to purchase the greenback, it said.

Authorities spent ¥1.2 trillion in January and February, the paper said, adding interventions later had brought the sum to about ¥2 trillion.

The amount is considered large as market interventions cost authorities some ¥3.2 trillion in the whole of 2001 and ¥4 trillion last year, it said.

The authorities want to prevent the yen's rise, particularly because the stock market is now at a 20-year low, it said.
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