ID :
44041
Tue, 02/03/2009 - 22:41
Auther :
Shortlink :
https://oananews.org//node/44041
The shortlink copeid
BOJ to resume buying bank-held stocks for financial stability+
TOKYO, Feb. 3 Kyodo -
The Bank of Japan said Tuesday it will resume the purchase of stocks held by
banks, in the latest sign that the current global financial turmoil has
increasingly damaged Japanese financial institutions' balance sheets through
sharp falls in the value of their shareholdings.
''Risks caused by stock price volatility have amounted to a serious problem''
to the Japanese financial system, BOJ Governor Masaaki Shirakawa told reporters
after the central bank unveiled the plan to buy shares worth 1 trillion yen
($11.14 billion) held by commercial banks.
Explaining why the BOJ is again mobilizing the policy instrument, which was
shelved five years ago, Shirakawa said at a press conference that the bank had
realized the need for it to play a role as a ''safety valve'' that could help
stabilize the system.
The emergency policy will be in effect through April next year. The BOJ is
expected to resume the purchasing operation within the current business year
ending next month.
The move comes as part of the BOJ's efforts to encourage banks to offer more
loans to companies at a time when small businesses are suffering from a credit
crunch, facing trouble raising operating capital to cover the approaching end
of fiscal 2008, which ends March 31.
The BOJ puts weight on ''curtailing the risk to financial institutions that
hold stocks,'' Shirakawa said.
Under the new policy, the BOJ will purchase listed stocks with a rating of
BBB-minus or higher at market price. The BOJ is setting a purchase limit per
issuer -- 250 billion yen -- to ensure the diversification of its purchased
stocks.
The BOJ also said it will not sell purchased stocks until the end of March 2012
and will complete the offloading of those stocks by the end of September 2017.
The decision represents the BOJ's resolve to accept credit risks despite
criticism that the central bank should not buy risk-laden assets that could
hurt its own balance sheet.
In a recent move, the BOJ launched the operation to purchase outright
commercial paper, or short-term debt issued by companies, in order to
facilitate corporate finance as firms see rising costs to raise necessary funds
given a drying up of liquidity in the capital markets.
The BOJ purchasing corporate debts or stocks means the bank is exposed to
credit risks because it could incur losses if issuers go bankrupt. Experts say
the act could consequently damage the yen's credibility.
Shirakawa, however, said the BOJ has sufficient buffers against such risks,
including an upper limit in the amount of stocks it can buy as well as possible
loss-cut provisions.
''Soundness of (the BOJ's financial health) will be secured,'' he said.
The BOJ last conducted the purchase of bank-held stocks between November 2002
and September 2004. During the period, it bought some 2 trillion yen worth of
bank-held shares while offering to buy a total of 3 trillion yen.
The BOJ's latest action coincides with a recent government move to restart the
purchase of stocks held by financial institutions through the state-backed
Banks' Shareholdings Purchase Corporation. The government's old scheme expired
in September 2006.
The proceedings for the government's legislation are under way. However,
possible passage in the Diet is expected to take time.
The environment has prompted speculation among market players that the
government may have pressed the BOJ to take the step as soon as possible,
although Shirakawa denied there had been any pressure from the government.
The offered amount of 1 trillion yen was determined after the BOJ ''considered
things comprehensively,'' Shirakawa also said.
Some analysts say the amount is too small to have a decisive impact. But others
say the BOJ may raise the upper limit, as it did in the previous purchasing, if
many banks ask the BOJ to buy shareholdings.
''While Japanese financial institutions have reduced their stockholdings
compared with those in the beginning of 2000s,'' the BOJ said in its statement,
''their latest third quarter financial statements have reported massive
realized and unrealized losses, suggesting that coping with market risk
associated with stockholdings remains their critical business challenge.''
After the BOJ's announcement around noon, Tokyo stocks advanced, with the
benchmark Nikkei index rising more than 2 percent before losing ground.
Bank issues attracted strong buying with Mizuho Financial Group, one of the
country's three mega-banking groups which last week sharply cut its profit
estimate for fiscal 2008, surging nearly 9 percent at one point, although it
ended the day unchanged from Monday.
==Kyodo
The Bank of Japan said Tuesday it will resume the purchase of stocks held by
banks, in the latest sign that the current global financial turmoil has
increasingly damaged Japanese financial institutions' balance sheets through
sharp falls in the value of their shareholdings.
''Risks caused by stock price volatility have amounted to a serious problem''
to the Japanese financial system, BOJ Governor Masaaki Shirakawa told reporters
after the central bank unveiled the plan to buy shares worth 1 trillion yen
($11.14 billion) held by commercial banks.
Explaining why the BOJ is again mobilizing the policy instrument, which was
shelved five years ago, Shirakawa said at a press conference that the bank had
realized the need for it to play a role as a ''safety valve'' that could help
stabilize the system.
The emergency policy will be in effect through April next year. The BOJ is
expected to resume the purchasing operation within the current business year
ending next month.
The move comes as part of the BOJ's efforts to encourage banks to offer more
loans to companies at a time when small businesses are suffering from a credit
crunch, facing trouble raising operating capital to cover the approaching end
of fiscal 2008, which ends March 31.
The BOJ puts weight on ''curtailing the risk to financial institutions that
hold stocks,'' Shirakawa said.
Under the new policy, the BOJ will purchase listed stocks with a rating of
BBB-minus or higher at market price. The BOJ is setting a purchase limit per
issuer -- 250 billion yen -- to ensure the diversification of its purchased
stocks.
The BOJ also said it will not sell purchased stocks until the end of March 2012
and will complete the offloading of those stocks by the end of September 2017.
The decision represents the BOJ's resolve to accept credit risks despite
criticism that the central bank should not buy risk-laden assets that could
hurt its own balance sheet.
In a recent move, the BOJ launched the operation to purchase outright
commercial paper, or short-term debt issued by companies, in order to
facilitate corporate finance as firms see rising costs to raise necessary funds
given a drying up of liquidity in the capital markets.
The BOJ purchasing corporate debts or stocks means the bank is exposed to
credit risks because it could incur losses if issuers go bankrupt. Experts say
the act could consequently damage the yen's credibility.
Shirakawa, however, said the BOJ has sufficient buffers against such risks,
including an upper limit in the amount of stocks it can buy as well as possible
loss-cut provisions.
''Soundness of (the BOJ's financial health) will be secured,'' he said.
The BOJ last conducted the purchase of bank-held stocks between November 2002
and September 2004. During the period, it bought some 2 trillion yen worth of
bank-held shares while offering to buy a total of 3 trillion yen.
The BOJ's latest action coincides with a recent government move to restart the
purchase of stocks held by financial institutions through the state-backed
Banks' Shareholdings Purchase Corporation. The government's old scheme expired
in September 2006.
The proceedings for the government's legislation are under way. However,
possible passage in the Diet is expected to take time.
The environment has prompted speculation among market players that the
government may have pressed the BOJ to take the step as soon as possible,
although Shirakawa denied there had been any pressure from the government.
The offered amount of 1 trillion yen was determined after the BOJ ''considered
things comprehensively,'' Shirakawa also said.
Some analysts say the amount is too small to have a decisive impact. But others
say the BOJ may raise the upper limit, as it did in the previous purchasing, if
many banks ask the BOJ to buy shareholdings.
''While Japanese financial institutions have reduced their stockholdings
compared with those in the beginning of 2000s,'' the BOJ said in its statement,
''their latest third quarter financial statements have reported massive
realized and unrealized losses, suggesting that coping with market risk
associated with stockholdings remains their critical business challenge.''
After the BOJ's announcement around noon, Tokyo stocks advanced, with the
benchmark Nikkei index rising more than 2 percent before losing ground.
Bank issues attracted strong buying with Mizuho Financial Group, one of the
country's three mega-banking groups which last week sharply cut its profit
estimate for fiscal 2008, surging nearly 9 percent at one point, although it
ended the day unchanged from Monday.
==Kyodo
