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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: BubbaFred who wrote (31277)	10/12/1998 5:34:00 AM
From: flickerful	Respond to of 94695

Tokyo to consider doubling bail-out ...... ft/12 oct 98 By Gillian Tett in Tokyo The Japanese government will this week discuss plans that would more than double a proposed injection of public funds into the country's troubled banking sector to ¥67,000bn ($570bn). The negotiations follow proposals from the opposition Democratic Party of Japan to overhaul and expand the current framework for injecting public money into banks. The current plan involves an injection of ¥30,000bn. The ruling Liberal Democratic party has not yet given an official reaction to the suggestion but Keizo Obuchi, the prime minister, pledged over the weekend that the party would "work on the scheme". And some senior LDP officials have indicated the party broadly supports an expansion of the ¥30,000bn scheme. Any decision to expand the pool of money will come as a relief to Japan's trading partners, which lobbied Japan at the recent G7 meeting in Washington to take action to reform its banking sector. The move could also boost the Japanese markets, as confidence in Japan's economy has been badly dented in recent weeks by the political deadlock over banking reform. James Fiorillo, analyst at ING Barings said: "This ¥67,000bn plan seems credible. It is what they need to do - this is definitely good news." However, the size of the injection could run into a political storm - ¥67,000bn is equivalent to about a ninth of Japan's gross domestic product. Many banking analysts remain cynical about the scheme until firm details emerge - not least because Japan has repeatedly promised to produce grandiose reform plans over the last year, and then failed to enact them. A political row recently derailed a scheme to use ¥13,000bn to expand the banks' capital. In recent days officials at the Ministry of Finance and the Bank of Japan have stepped up their campaign to persuade politicians to reinstate the scheme. A senior financial official said: "If the banks do not get public funds, there will be a very serious credit crunch which could tip the economy into a recession." Both the LDP and the DPJ are understood to be preparing plans to use between ¥30,000bn and ¥50,000bn to nationalise failed banks and expand the capital bases of weak but solvent banks. This money would be in addition to a separate ¥17,000bn pool of funds that has already been earmarked to protect depositors if a bank collapses. The parties have not yet indicated which banks might be helped. However, Sakura and Fuji Bank, two of the largest banks, denied media reports over the weekend that they would soon receive public money to expand their capital base.