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

TOKYO, Oct. 8 Kyodo - 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 in the past with its own 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 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 got more tense in the United States and Europe than before
and they are believed to be under increased 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 interest rate cuts and currency market
interventions would be considered depending on financial conditions, and that
the G-7 meeting will not be a particular occasion to adopt those 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 taxpayers' money injection after
Wednesday's announcement by the British government of a 50 billion pounds ($88
billion) rescue plan for its ailing 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 economist at Mizuho
Securities Co.
Although the United States would have to wait until the presidential election
is over in early November before realizing capital infusion, it would help
stabilize the global market conditions if the G-7 can adopt the 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 as 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.
He said market participants will also focus on whether the U.S. and European
G-7 members will agree on coordinated interest rate cuts to cope with the
current credit crisis.
==Kyodo