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Wednesday, Oct. 15, 2008

Steps set to keep TSE stable


Staff writer

The government announced a package of measures Tuesday to stabilize the volatile stock market, including suspending sales of government-held shares.

Finance Minister Shoichi Nakagawa, just back from the Group of Seven finance ministers' meeting in Washington, said the government may even step up buying of financial shares if companies become unstable.

"If the situation changes, we will take appropriate measures at an appropriate time," he said at his regularly scheduled news conference. "But for the time being, our policy is to suspend sales of what we have."

The government and the BOJ have bought shares of ailing banks in the past to prevent a meltdown in the banking sector. The government purchased about ¥1.6 billion worth of shares through 2006, while the central bank purchased ¥2 trillion worth of shares to 2004.

Tuesday's move means the government will temporarily halt the selling of those shares. Nakagawa said he hopes the BOJ will follow suit with its own portfolio.

The government will also extend the law allowing for public fund injections to protect people with life insurance following the surprise collapse last week of Tokyo-based Yamato Life Insurance Co.

When a life insurance company goes bankrupt, most benefits are paid to policyholders through public funds and via a fund managed by life insurers.

The fund injection law will expire in March, but the government plans to extend it for three more years just in case.

The government will also ease purchasing restrictions for stock buybacks, including the single-purchase volume limit.

This maximum will be raised from 25 percent of average trading volume to an issue's average daily trading volume for the preceding four weeks.

This move followed reports that Ford Motor Co. may sell off its controlling stake in Mazda Motor Corp. and that Mazda is considering buying some of it.

As for the possible use of public funds, the government said it is looking at recapitalizing regional and smaller financial institutions hit by plunging stock prices since the global financial turmoil entered crisis mode.

The government is concerned that the worsening business environment for regional banks is causing them to cut back on lending.

Under the law, the government can inject public funds as a preventive step even if financial institutions are not in dire need of those funds.



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