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Home > Media Reviews > News Review Last Updated: 12:43 10/27/2008
News Review #469: October 27, 2008

Japan to Raise Capital Injection Fund to 110 Bln Dlrs: Minister

Reviewed by Takahiro MIYAO

Japan to Raise Capital Injection Fund to 110 Bln Dlrs: Minister
AFP (10/26/2008)


It is reported in the AFP article (see the link above) that the Japanese government is to announce an emergency policy package to stabilize the nation's financial markets, including a measure to increase a fund that can be injected into ailing banks from 2 to 10 trillion yen (110 billion dollars). As is well known, the emergency situation in Japan is being created, mainly due to a sharp decline in stock prices, hitting a new low in the "post-bubble" era almost everyday, and thus affecting various financial institutions as well as other investors in the Tokyo market.

As pointed out by economic and fiscal policy minister Kaoru Yosano, however, Japanese financial institutions have been affected less than their western counterparts by the global economic crisis, and no major institutions are likely to collapse in Japan anytime soon. Actually, the recent decline in stock prices in Tokyo has not been caused by the lack of confidence in nation's financial system, but rather by a sharp rise in the value of the yen, which is often associated with recessionary impacts on the export-oriented industry in Japan. The irony here is that the sharp rise in the yen has been due to the relative strength, not the weakness, of Japanese financial institutions, as Mr. Yosano mentioned.

If that is the case, what is to be done is not to inject more funds into the banking sector, but rather to try to stop further increases in the value of the yen by buying up foreign currencies in the market. However, such a measure may not be easily adopted, because there would likely be criticisms, saying that Japan should not buy up any more foreign currencies, especially the US dollar, which might well be declining in value in the future.

This review is adopted from the following blog (with its Japanese translation):

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