Gov`t to monitor possible fallout from GM failure in Japan

TOKYO, June 1 Kyodo -
The Japanese government will closely monitor any fallout in Japan from the
imminent bankruptcy of General Motors Corp. to avoid as much disruption to the
Japanese automotive industry as possible, Chief Cabinet Secretary Takeo
Kawamura said Monday.
The government plans to extend aid to Japanese suppliers of auto and other
parts to GM to minimize the impact of the U.S. auto giant's bankruptcy,
expected to be filed later in the day, sources close to the matter said
separately.
''I've heard that (Japanese auto parts makers) have taken various steps''
assuming that GM would enter the process of corporate rehabilitation, Kawamura
said at a press conference, adding he has also heard that no real damage has
occurred so far in areas such as payments.
According to private credit-research agency Tokyo Shoko Research, 114 Japanese
companies have business ties with GM and its group firms, of which more than
half are located in the Kanto region centering on Tokyo. Of the 114 firms, 70
are auto parts makers and other manufacturers.
The U.S. government said Sunday it will place GM under state management after
its planned Chapter 11 bankruptcy filing Monday morning.
News of the largest nonfinancial corporate failure in U.S. history reached
Tokyo on Monday morning.
The sources said the Japanese government plans to use funds in its emergency
financial aid program for small and midsize firms that it has set aside as part
of its economic stimulus measures.
''I don't expect a chaotic situation,'' Economy, Trade and Industry Minister
Toshihiro Nikai told reporters, sounding optimistic about the aftermath of GM's
filing for bankruptcy protection.
But he also said the government could be involved in rescuing affected
companies through emergency measures such as the provision of safety-net loans
through state-backed financial institutions.
Harufumi Mochizuki, the vice industry minister, said separately that many of
the Japanese firms concerned had ''factored in'' the tough environment
surrounding the U.S. carmaker. He denied any imminent possibility of a crisis.
Mochizuki expressed Japan's hope that the U.S. government's efforts to revamp
GM ''will be successful for the sake of the world economy.''
On a similar note, Vice Finance Minister Kazuyuki Sugimoto said the Chapter 11
filing would not have a major impact on the Japanese economy.
''As GM will be in the process of reconstruction, it's not that there will be
no influence,'' Sugimoto, the Finance Ministry's top bureaucrat, said at a news
conference. ''But I understand that there will probably be no major turmoil''
for Japan's economy.
Sugimoto said he has been informed that Japanese makers of auto parts have
already taken necessary steps with the filing in mind.
Japanese auto parts makers such as Denso Corp., Bridgestone Corp., Aisin Seiki
Co., Mitsubishi Electric Corp., Akebono Brake Industry Co. and Yorozu Corp.
have reportedly already applied for the U.S. government program.
But analysts caution that the impact of GM's imminent bankruptcy remains
uncertain since not all of the affected Japanese firms will be eligible for the
U.S. Treasury program and since doubts linger over GM's ability to revive as a
global auto giant in the near future.
Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Securities
Co., cautioned that the anticipated Chapter 11 filing may have a mid- to
long-term impact on the U.S. economy as a whole since concern about the
expansion of the U.S. fiscal deficit will increase as the U.S. government
injects more cash into GM.
''While worries over (GM's) financial standing will ease with the U.S.
government support following the bankruptcy, the question will remain whether
(GM as a) company will be able to survive as an automaker,'' Fujito said.
Takahide Kiuchi, chief economist at Nomura Securities Co., also said in a
report that GM's failure is likely to impact the Japanese economy if concern
about the ballooning U.S. budget deficit triggers a fall in the U.S. dollar,
bonds and stocks.
A stronger yen relative to the dollar will hurt Japanese exporters in
particular due to an erosion of overseas profits when repatriated.
But for the moment, Japanese stock markets appear to be giving a relatively
muted response with the key Nikkei stock index soaring to an almost eight-month
closing high as market players had priced in the widely reported news.
''It's just another company facing business difficulties,'' said Richard
Jerram, chief economist at Macquarie Securities Ltd. in Tokyo. ''I don't see
why you should think it's going to have a profound impact on macroeconomic
variables.''
==Kyodo