Monday, October 27, 2008
TOKYO, Oct. 27 -- Japan's prime minister said Monday that his government will take action to help counter a financial crisis that has driven the yen close to a 13-year high and fed a 50 percent slump this year in the Nikkei 225 stock index.
"Unless we take appropriate steps, there will be a major impact on the real economy," Taro Aso told reporters. "We must act as soon as possible, starting today."
Among those steps, Aso said, will be stronger oversight over the short-selling of Japanese stocks.
And the government may resume buying up shares of Japan's banks, said Hakuo Yanagisawa, a ruling Liberal Democratic Party lawmaker. The government bought more than $21 billion of bank shares between 2002 and 2006.
The yen has surged almost 30 percent against the euro in the past three months, and in addressing the run-up, Finance Minister Shoichi Nakagawa told reporters that Japan is ready to take action on the currency if needed. The Group of Seven industrial nations subsequently issued a statement saying it was concerned about the recent excessive movements of the yen.
The Nikkei hit a 26-year low in early trading Monday, before rebounding on speculation that the government would introduce measures to boost the stock market. Bank shares, however, plunged on concern that new equity sales would dilute shareholder value.
Mitsubishi UFJ Financial Group, which is investing $9 billion in Morgan Stanley, fell as much as 15 percent -- a record decline for the firm -- in early trading after national media reported that it might seek to raise as much as $10.6 billion in capital to offset unrealized losses on shareholdings.
The bank, Japan's biggest, was down 11 percent on the Tokyo Stock Exchange when the morning trading session closed.
Shares of Mizuho Financial Group, Japan's second-largest bank by revenue, and Sumitomo Mitsui Financial Group, the third-biggest, also fell after broadcaster NHK reported the two Tokyo-based lenders might also raise capital. Aozora Bank, controlled by Cerberus Capital Management, traded down 25 percent to 72 yen after plummeting by a record 29 percent.
Profit is set to decline at Japanese banks after debt from bankruptcies soared and the global credit crisis pushed the nation toward a recession. The fall of the Nikkei has eroded the value of shares the lenders hold as part of their capital.