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Thu, Apr 23, 2009 - Page 10 News List

Japan passes law to prop up firms

POSSIBLE MEASURES Facing difficult times, Elpida, Hitachi, NEC and Toshiba are all Japanese giants that stand to receive financial assistance from the government

AFP , TOKYO

Japan passed a law yesterday to enable injections of public funds into struggling companies, with electronics makers reportedly set to receive hundreds of millions of dollars in government assistance.

Pioneer, Hitachi and Elpida Memory are among the firms considering applying for funds in exchange for stock under the revitalization law program.

“We are considering seeking public funds as one possible measure,” Pioneer spokesman Akio Omachi said, adding that nothing definite had been decided yet.

The Nikkei Shimbun said yesterday that Pioneer hopes to get ¥30 billion (US$303 million) and Elpida was aiming for ¥50 billion in exchange for issuing stock to a state-backed lender.

The newspaper said the government was concerned about Pioneer’s weakness and the impact that its failure would have on the overall economy owing to its 10,000-strong workforce in Japan alone.

Companies seeking government money under the revised law are required to meet certain conditions, including having at least 5,000 workers and sufficient recovery plans.

“Emergency aid will help the economy as the global economic crisis has hammered demand and hit firms that would otherwise be profitable with their technological prowess,” Daiwa Institute of Research economist Hiroshi Watanabe said.

Pioneer shares shot up 17.1 percent and Elpida soared 14.9 percent on hopes of financial aid, far outperforming a 0.18 percent rise in the benchmark NIKKEI index.

Japanese firms have been hit hard by a slump in exports and weak domestic demand amid the country’s worst recession in decades.

Official figures showed yesterday that Japan suffered a trade deficit in the fiscal year to last month, the first such shortfall in 28 years.

Pioneer has forecast a net loss of ¥130 billion for the last financial year which ended last month, its biggest ever.

It is also cutting 10,000 jobs worldwide and quit the television business to focus on car electronics.

Elpida, the third-largest maker of DRAM chips used in mobile phones and home electronics, has also said it may tap the government for funds to enhance its capital base, though it has not said how much.

The Nikkei reported that in addition to obtaining funds from the Development Bank of Japan in exchange for shares, Elpida also hopes to secure an emergency loan of ¥20 billion from the state-backed lender.

An Elpida spokesman said that the company would make a final decision on whether it would apply for government money after looking at the details of the scheme.

Hitachi, which is bracing for a full-year loss of about US$7 billion, also said this week it was considering joining the revitalization program.

The Yomiuri Shimbun said that NEC and Toshiba were also considering applying for the program.

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