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2009年2月 5日 (木)



--The Asahi Shimbun, Feb. 4(IHT/Asahi: February 5,2009)

EDITORIAL: Stock purchasing by BOJ


The Bank of Japan, in an unusual move to shore up the cash flow of companies, has opted to resume buying up stocks in private companies held by financial institutions.


The BOJ carried out similar purchases of bank-owned stocks from November 2002 to September 2004 when it bought up some 2 trillion yen in shares. Japan at that time was struggling to write off bad loans and the fiscal condition of the nation's banks was at an all-time low.


In April 2003, the Nikkei stock average fell to a record low following the collapse of the asset-inflated economy in the early 1990s. Unprecedented steps were taken to prevent the financial system from crumbling.


The setting is somewhat different this time around. For one thing, the financial system itself has yet to be rocked to its foundations. Yet, as a result of curbs placed on financing by banks in the interest of maintaining sound business practice, companies in need of funds are increasingly teetering on the edge of failure. This stock buy-up seeks to ease that credit crunch. The new purchases will total about 1 trillion yen, half of what was spent previously.


Extraordinary measures must be taken to deal with rapidly worsening economic conditions caused by the current global crisis. At the same time, the banks must also do their utmost to see that they are functioning properly.


As their share prices fall, financial institutions are finding themselves saddled with hefty valuation losses. This is one emerging factor behind the credit pinch. There are also concerns that stock prices will continue to decline toward the end of the fiscal year, further aggravating the lending reluctance of banks. If the BOJ acts now to buy up shareholdings, it should be possible to prevent a further expansion in latent losses. It will also help to stave off a price slide triggered by the unloading of stocks on the marketplace.


The BOJ decided to buy up stocks at the request of the government, which itself is mobilizing the Banks' Shareholding Purchase Corp. to buy up a maximum of 20 trillion yen in shares. A bill has been submitted to the Diet for this purpose.


The BOJ has already embarked on the unusual measure of purchasing short-term corporate bonds known as commercial paper. It has also begun preparations to buy regular corporate bonds.


These measures are basically intended purely for the purpose of bolstering bank financing of small and medium enterprises and other clients and preventing cash-flow-linked bankruptcies. In essence, however, the banks should be working on their own to strengthen their capital and expand their lending capabilities.


Taking this to heart, financial institutions need to explain the efforts they are making to supply funds to companies. The authorities should carry out checks on the status of this progress.


Under the revised financial function reinforcement law, the conditions for increasing capital through public funds were eased. Yet, only three banks are reported to be considering applications for such cash injections. Financial institutions unable to raise funds through their own efforts should be encouraged to make active use of this law to bolster their capital.


In the past, banks held large volumes of stocks through cross-holdings with companies. As a result, they suffered massive losses from the share-price plunge that followed the post-bubble financial crisis, and should have learned the lesson that owning shares undermines banks' health.


If financial institutions once again increase their holdings of stocks taken over from other companies in the subsequent economic recovery, thereby steadily reviving the structure that caused so much turmoil in the past, the outcome does not auger well.



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