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TOKYO: Japan plans to sharply increase the ceiling on public funds that can be injected into ailing banks from two to 10 trillion yen (110 billion dollars), economic and fiscal policy minister Kaoru Yosano said Sunday.
Prime Minister Taro Aso's Cabinet is expected to announce an outline of the fresh package, part of emergency measures to stabilise the nation's financial markets, as early as later Sunday.
The existing maximum of two trillion yen for the bank recapitalisation is "quite insufficient," Yosano said in a television interview.
"I think it's going to be around 10 trillion yen," he added.
But Yosano insisted Japan was less affected by the global financial crisis than other big economies, adding: "We are absolutely not in a situation where we will see Japanese banks collapse one after another."
The fresh package of measures is also expected to allow the government-run Banks' Shareholdings Purchase Corp. to resume buying stocks unloaded by banks in a bid to support ailing managements, media reports said.
The body was set up in January 2002 during an earlier financial crisis and continued operations through to 2006, at which point its holdings were valued at around 1.6 trillion yen.
Under the measures, the government will also ask the Bank of Japan to buy shares from banks, while planning to introduce stricter regulations for stock trading, set more flexible fair value accounting rules and revise the capital ratio requirements for banks.
The government had already announced a first step of market stabilisation measures in mid-October, including easing stock buyback rules and temporarily suspending sales of government-held shareholdings.
Observers say that by presenting a variety of measures and highlighting its willingness to tap all available resources, the government is trying to ease mounting concerns about the stock market and financial institutions.
In the television interview, Yosano backed reported plans by major banks, including Mitsubishi UFJ Financial Group Inc., to raise capital by issuing new shares.
"I think it's preferable for banks to raise capital by themselves" so that they can head off a credit crunch, Yosano said.
MUFG, Japan's biggest financial group, is considering raising one trillion yen in new capital following its massive investment in US bank Morgan Stanley, news reports said on Sunday.
It has already asked three Japanese and US investment banks to be co-lead managers of the stock offering, all of which agreed, the Nikkei business daily said.
- AFP/vm/ir
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