Fukuda downplays Lehman failure's effect on Japan

TOKYO, Sept. 16 Kyodo - Prime Minister Yasuo Fukuda on Tuesday shrugged off the Lehman Brothers Holdings Inc. bankruptcy's impact on the Japanese financial system as ''rather small'' but called for calm reaction.

The collapse of the fourth-largest U.S. securities house will not affect
Japanese financial institutions ''so seriously,'' Fukuda told reporters, adding
that the government will carry out economic and financial policies while
grasping related developments through cooperation with other countries.
''It's important to revive the Japanese economy'' by compiling a supplementary
budget under a comprehensive package of stimulus measures, Fukuda said.
Earlier in the day, Finance Minister Bunmei Ibuki expressed belief that the
Lehman bankruptcy will not seriously damage the Japanese financial system
despite some institutions' exposure to the U.S. brokerage.
''Considering the conditions of each financial institution's self-owned
capital, we do not have to worry about the Japanese financial system, though
those entities have extended loans to Lehman,'' Ibuki said at a press
conference.
Ibuki said he, together with Economic and Fiscal Policy Minister Kaoru Yosano,
told other Cabinet ministers that Tokyo is ready to react flexibly on this
matter and to communicate with international and domestic stakeholders.
Ibuki said Group of Seven countries are open to talk about this issue anytime.
The G-7 groups Britain, Canada, France, Germany, Italy, Japan and the United
States.
Fukuda, Chief Cabinet Secretary Nobutaka Machimura, Bank of Japan Governor
Masaaki Shirakawa and Economy, Trade and Industry Minister Toshihiro Nikai
discussed with Ibuki and Yosano Japan's response to the Lehman collapse in an
emergency meeting Tuesday morning.
Fukuda vowed to coordinate with financial authorities in other countries and
told the ministers to closely watch market movements, according to Yosano and
Ibuki.
Ibuki downplayed the yen's sharp advance relative to the U.S. dollar after the
bankruptcy, saying the fluctuations are ''within expectations.'' He said the
ongoing Tokyo stock plunge does not seem to be ''panic'' selling.
Yosano said, ''We have to calmly accept fluctuations of 2 to 3 yen as levels
decided by market players.'' He also said a sharp drop in Tokyo stocks Tuesday
morning is ''not surprising,'' since the Tokyo market often traces moves in
Europe and the United States.
On overall U.S. economic conditions, Yosano said he expects the U.S. economy to
''gradually return to a recovery path in the fall of next year or later.''
The Japanese economy relies on U.S. demand for its exports, but the adverse
effects from the deteriorating U.S. economy ''will not suddenly get worse
further to the extent they cannot be handled'' because of the Lehman failure,
he said.
''We will just see the sequel of the U.S. subprime crisis, which broke out last
year,'' he added.
Machimura said at a separate news conference that the negative impact on
Japanese financial entities has so far been limited, but warned that the
faltering U.S. economy may affect the Japanese economy later.
The government's top spokesman said the government will steadily carry out an
emergency economic package to stem repercussions on Japanese small businesses
and consumers.