Japan to broach public fund injection at G-7 meet: official

TOKYO, Oct. 8 Kyodo - (EDS: UPDATING WITH 6 CENTRAL BANKS' JOINT RATE CUTS)
Japan will offer food for thought for fellow Group of Seven economies during an
upcoming meeting by sharing its experience of massive public fund injections
into the country's troubled banks when dealing with its own previous financial
crisis, a senior Finance Ministry official said Wednesday.

Although it is up to each country to decide how to tackle the current credit
crisis, Japan's injection of 12.3 trillion yen into ailing financial bodies
between the late 1990s and early 2000s helped clear away the nation's bad-loan
mess and could be of some use for other economies, the official said.
Finance ministers and central bank governors from Britain, Canada, France,
Germany, Italy, Japan and the United States are set to gather in Washington on
Friday to discuss their responses to the ever-widening financial crisis.
Prime Minister Taro Aso implied Tuesday that the United States and European
economies need to use public funds to quell the ongoing financial turmoil,
saying, ''Japan can talk proudly about its experience of overcoming its own
financial crisis by injecting (about) 13 trillion yen in funds.''
Finance Minister Shoichi Nakagawa also told reporters Tuesday, ''Japan can be
of help (to other G-7 economies) by letting them know our experience of
struggling (with our own financial crisis).''
The senior official said that while Japan has repeatedly told its fellow G-7
partners about its past remedial measures, U.S. and European financial leaders
are expected to listen more attentively to what Japanese representatives have
to say.
''The situation has become more tense in the United States and Europe than
before and they are believed to be under increasing pressure to consider the
use of public funds as a realistic option,'' the official said on condition of
anonymity.
The official said G-7 economies will likely agree to do their part in resolving
the current global financial crisis and are not expected to come up with a
joint step, such as the establishment of a fund, to help embattled financial
entities in the United States, the epicenter of the turmoil.
He said coordinated actions including currency market interventions would be
considered depending on financial conditions, and that the G-7 meeting will not
be a particular occasion to adopt such measures.
Private-sector economists said the G-7 may call for the use of public funds in
its statement to be issued Friday, following the International Monetary Fund's
estimate Tuesday that some $675 billion in capital would be needed to shore up
the major global banks' capital bases.
The seven nations may also back the injection of taxpayers' money after
Wednesday's announcement by the British government of a 50 billion pound ($88
billion) injection plan for its banks, they said.
''I expect that the G-7 nations will note in their statement as a general idea
the need to use government money to boost capital bases'' of the troubled
financial institutions, said Yasunari Ueno, chief market economist at Mizuho
Securities Co.
Although the United States would have to wait until the presidential election
is over in early November before realizing a capital infusion, it would help
stabilize global market conditions if the G-7 can adopt a common stance, he
said.
Hideo Kumano, chief economist at the Dai-ichi Life Research Institute, said the
United States might be positive about including sentences about the public fund
use in the G-7 statement, because such a step could be considered a ''circuit
breaker'' for the financial crisis.
''When their own houses are on fire, they will not hesitate to secure reservoir
water to extinguish it,'' Kumano said of the situation in the United States.
Even before the G-7 meeting, the U.S. Federal Reserve, the European Central
Bank and four other central banks in Europe and Canada announced on Wednesday
coordinated cuts in their key interest rates in response to violent movements
in global financial markets.
The Bank of Japan did not take part in the action, but it pledged in a joint
statement issued with the six other banks to try to secure financial market
stability through its money market operations.