Shiokawa Urges Use of Public Funds to Help Banks (Update1)
By Ann Saphir
Washington, Sept. 28 (Bloomberg) -- Japan should use taxpayer money to bail out UFJ Holdings Inc. and other banks that deplete their capital as they write off $428 billion in bad loans, Finance Minister Masajuro Shiokawa said.
``It's my opinion that banks need to distinguish between viable and non-viable companies,'' Shiokawa said at a press conference following a meeting with his counterparts at the Group of Seven industrial nations in Washington Friday.
Banks should write off bad loans to companies that aren't viable, he said. ``As a result, some banks may not have sufficient capital,'' he said. ``In such cases, capital should be injected into banks.''
The view, which Shiokawa said is his ``personal opinion,'' suggests Japan is moving closer to its third bank bail out in four years in the face of opposition from bank regulator chief Hakuo Yanagisawa.
Prime Minister Junichiro Koizumi, who may resolve the conflict within the government when he reshuffles his cabinet Monday, has pledged to speed up disposal of bad loans to get the economy going again.
The mixed signals coming from the government helped weaken the yen, which slid to 122.53 against the dollar at 4:30 p.m. in New York on Friday, compared with 122.06 a day earlier.
The debate over a bank bailout comes a week after the Bank of Japan said it would buy some of $200 billion in stockholdings held by Japan's lenders, signaling its view that banks need government help to survive.
Standard and Poor's
Japan spent a total of 9.3 trillion yen to bail out the largest lenders in 1998 and 1999. Bad and at-risk loans may total as much as 150 trillion yen (1.2 trillion yen), Standard and Poor's said Thursday. That's three times the government estimate and more than a quarter of Japan's 530 trillion yen gross domestic product.
The stock-buying plan is ``meant to secure financial system stability,'' central bank chief Masaru Hayami told reporters at a Washington press conference Friday. ``It's also an important step to encourage banks to allocate more of their management resources to the disposal of non-performing loans.''
Shiokawa also said public money should also be used to shore up capital at weaker regional banks that merge with stronger rivals.
``Japan has too many banks, and some regional banks should be merged,'' he said. ``To help resolve this over-banking problem, public funds should be injected'' to encourage mergers. |
