Japan Will Buy 20 Trillion Yen of Bank-Held Stocks

Dec. 19 (Bloomberg) — Japan’s government will buy as much as 20 trillion yen ($223 billion) of shares held by banks, the Cabinet Office said in a statement in Tokyo today.

The amount is part of a stimulus package totaling about 75 trillion yen, the statement said. An additional 10 trillion yen of the package will be devoted to making capital injections into banks.

The government aims to make funds available to banks to encourage them to lend more to smaller companies that are struggling amid the worst global financial crisis since the Great Depression. Investment losses on stocks have eroded banks’ capital, making it more difficult for them to boost loans.

The Nikkei 225 Stock Average fell 43 percent this year through yesterday and is set for a record decline. Mitsubishi UFJ Financial Group Inc., the nation’s biggest bank, and other Japanese financial institutions have announced plans to raise at least $37 billion combined in capital to shore up their balance sheets.

To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

Last Updated: December 18, 2008 20:36 EST
By Finbarr Flynn

Source: Bloomberg

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