Tokyo, April 6 (Bloomberg) -- Japan embarked on its third bank rescueplan in three years, offering to buy some of the 43 trillion yen ($368billion) of shares that banks own to help them write off bad loans. Mizuho Holdings Inc. and other big banks have until March 31, 2003 towrite off their worst loans, estimated at 13 trillion yen, the governmentsaid. The fund will buy stocks that banks bought in companies to whichthey lend in order to cement ties. Bank stocks and the yen tumbled as investors dismissed a proposalthat failed to explain how banks will be prevented from propping upcompanies that are unprofitable or can't repay their debt. It came twoyears after a 7.5 trillion yen, taxpayer-funded bailout. ``They didn't do anything new,'' said Ron Bevacqua, a senior economistat Commerz Securities Japan Inc. ``Corporate managers can continueto sit in their cushy offices and mismanage the entire Japaneseeconomy.'' Financial Services Minister Hakuo Yanagisawa said the continuedassistance may raise concern the government will allow banks to avoidresponsibility for making bad decisions by always bailing them out. ``There is a great possibility of creating moral hazard,'' he told reporters.In addition to the 1999 bailout, the government loaned 1.8 trillion yen to21 major banks in 1998.
Bank Stocks
Mizuho shares fell 7 percent, Asahi Bank Ltd. dropped 6 percent andSumitomo Trust & Banking Co. shed 5.9 percent. The yen fell to 125.35to the dollar from 124.01 when the package was announced. The Nikkeistock index closed little changed after erasing a 2.2 percent gain. ``There's more disappointment from what's come out,'' said HisanoriGondo, who manages 12 billion yen in Japanese stocks at INGInvestment Management Ltd. The stock fund, which will probably be financed by selling bonds, aimsto cut the level of stocks held by banks to 100 percent of their capitalfrom about 130 percent now. Banks need to offload about 11 trillion yenof shares to reach the target. Ten-year government bond yields, which rose as much as 25 basispoints during the past two weeks on concern the government will haveto sell more bonds to fund measures to stimulate growth, fell 2.5 basispoints to 1.27 percent on doubt the plan will do much to help theeconomy. The government's failure to specify a date for setting up the stock-buying fund and how it will force banks to write off bad loans is a ``bignegative,'' Gondo said.
`Buying Time'
The government plan won't force small and regional banks to write offtheir bad loans. Those banks are the biggest lenders to small andmedium-sized companies outside the main cities, which are among theruling Liberal Democratic Party's biggest contributors and supporters. ``Once again, the authorities are doing the minimum necessary to getover the next hurdle and buy time,'' Bevacqua said. ``It's so apparent toeveryone what the problems are, but there's no political ability to dealwith them.'' Yoshiro Mori, Japan's eighth prime minister in 11 years, resigned today,a year and a day after taking office. He said he'll step down when areplacement is chosen later this month. The frontrunner to succeed himis former prime minister Ryutaro Hashimoto, who is blamed for killing offa budding economic recovery by raising sales taxes in April 1997.
Taxpayer Money?
The government said it may consider using taxpayers' money held bythe Deposit Insurance Corp. to buy shares from the banks or guaranteebonds sold by the stock-buying body. Analysts bemoaned the lack of details. The plan failed to set a target forthe limit banks can hold in equities, failed to agree on the timing ofsetting up the fund and failed to agree on the structure of the fund andon government participation,'' said Hiromichi Shirakawa, chief economistat UBS Warburg Japan Ltd. A recommendation from the policy chiefs of the three parties in thecoalition government to cut capital gains, inheritance and gift taxes onstocks was sent to a tax panel for further consideration. ``Whether the tax panel will really finalize the issues is hard to see atthis point,'' said Yasukazu Shimizu, an economist at Aozora ResearchInstitute Ltd.