Tokyo, Nov. 21 (Bloomberg) -- The Bank of Japan's decision Tuesday to pump more cash into the economy was prompted by concerns about plunging bank share prices, Governor Masaru Hayami said. ``Share prices have tumbled to the level we have never experienced,'' Hayami said at a monthly press conference. ``We cannot just watch the situation unfold without taking action.'' The central bank Tuesday said it would increase the pool of money credited to the accounts of commercial banks as close as possible to 20 trillion yen ($164 billion), its current limit. The level of so-called current account reserves grows as lenders sell securities to the central bank. Bank shares have fallen because Japanese lenders haven't done enough to dispose of an estimated 52.4 trillion of bad loans and improve their profitability, Hayami said. That has worried investors.
The central bank will keep providing ``abundant'' funds to the financial system too support government efforts to push for the disposals of bad loans. For its part, the government should ``conduct appropriate fiscal policy steps to support the economy and achieve tax system changes to stimulate company activities and make it easier for banks to write off bad loans.''
Bond Purchases
He said it wasn't clear when banks would start selling some of their shares to the central bank. The central bank announced in September an unprecedented plan to buy as much as $16.4 billion in shares from Mizuho Holdings Inc. and other lenders to help them cut losses when stock prices fall. While the central bank kept the amount of government bonds it buys from lenders each month unchanged at 1.2 trillion yen on Tuesday, analysts speculated it might have to increase bond purchases to boost lenders' reserves. //www.quote.bloomberg.com