Gov`t eyeing boosting capital injections into banks to 10 tril. yen

TOKYO, Oct. 26 Kyodo -
The government is considering boosting the amount of public funds set aside for
injection into struggling banks' capital bases to 10 trillion yen from the
currently planned 2 trillion yen in an effort to assure the nation's banking
system in the face of the continuing deterioration of global stock markets,
government officials said Sunday.
The idea has emerged amid the recent meltdown on the Tokyo Stock Exchange. The
key Nikkei stock index lost 9.60 percent Friday from the previous day, closing
at its lowest level in about five years and five months.
The government is likely to announce the increase in the scale of the bank
recapitalization program, together with other emergency market-support
measures, even before Monday's opening of the TSE, they said.
Among other expected market-support measures is a plan to have Banks'
Shareholdings Purchase Corp., a public institution set up in 2002, purchase
shares held by banks to minimize the damage to banks' capital bases from
swelling latent losses in stockholdings.
Stricter rules on the short selling of stocks could also be included as a way
to stop a further deterioration of the stock market.
The government plans to cover the increase in the fund for the bank
recapitalization program from its fiscal 2008 extra budget, or the state budget
for fiscal 2009, the officials added.
Earlier Sunday, Economic and Fiscal Policy Minister Kaoru Yosano, speaking on a
television program, said of the recapitalization program, ''The 2 trillion yen
would not be enough. It could be around 10 trillion yen.''.
The government submitted a bill for the program to the Diet on Friday, aimed at
revising a bank recapitalization law and injecting public funds into the
capital bases of financial institutions, in part to prevent them from squeezing
lending to midsize and small corporations.
==Kyodo