Tokyo, March 11 (Bloomberg) -- Japan may sell its currency and speed spending to boost the economy, Finance Minister Masajuro Shiokawa said, as the Nikkei 225 Stock Average hovered near a 20- year low on concerns an attack on Iraq would hurt exports. ``We are ready to step into the market aggressively and immediately'' to keep the yen from rising, Shiokawa said at a regular press conference after the Cabinet met. The yen's 10 percent rise against the dollar in the past year threatens to squeeze profits of Japanese exporters such as Canon Inc. and drive the economy into a fourth recession in a decade. Plunging share prices may also cut the capital of banks burdened by 52.4 trillion ($449 billion) of bad loans when they close their books on March 31. Shiokawa said passing the budget for the fiscal year starting April 1 would lift slumping stock prices. He added that he wants the country's banks expand lending to healthy companies at the same time they dispose of their bad loans. The Nikkei 225 Stock Average fell 124.01, or 1.5 percent, to 7917.41 as of 1:40 p.m. in Tokyo, dipping below 8000 for a second day. The yen was at 116.85 to the U.S. dollar at 1:40 p.m. in Tokyo, compared with 116.84 late yesterday in New York. The Ministry of Finance may sell up to 1 trillion yen a day to stem the currency's rise, the Nihon Keizai newspaper reported today, without citing anyone. Hiroshi Watanabe, head of the ministry's international department, declined to comment on the report.
Share Cap
Prime Minister Junichiro Koizumi was scheduled to meet former prime ministers, including Ryutaro Hashimoto and Kiichi Miyazawa, at 4 p.m. to discuss a U.S.-led war against Iraq and its economic impact, the Prime Minister's office said. That will be followed by a meeting with leaders of the ruling coalition parties at 5:45 p.m. Japan may delay imposing a cap on banks' shareholdings in their borrowers as a way of boosting the stock market, the Nihon Keizai said, also without citing anyone. A requirement that Japan's biggest lenders reduce the shareholdings -- designed to shield their earnings from market fluctuations -- has contributed to falling stock prices by putting more shares up for sale on the market.
The stock market's decline is increasing losses on stockholdings at banks, threatening to reduce their capital below the 8 percent of risk-weighted assets recommended by the Bank for International Settlements. Mizuho Holdings Inc. and its six biggest rivals had a combined 5.8 trillion yen in unrealized losses on their stockholdings as of March 7, up 51 percent from Sept. 30, according to Daiwa Institute of Research.
Waning Confidence
Japan's economy grew 0.5 percent in the fourth quarter in the final three months of 2002, a Cabinet Office report said today, powered by overseas sales of companies such as Sony Corp. Prospects of a war in Iraq may already be hurting growth, economists said. ``Confidence at home is waning because there's so much uncertainty over a possible war in Iraq, and the stock market slump'' adds to the pessimism, said Takunori Kobayashi, chief economist at Daiwa Institute of Research Ltd. Speeding up government spending could boost consumer demand, which makes up more than half of the world's No. 2 economy, economists said. That would help overcome slumping exports, which fell in December and January. Yasuo Fukuda, chief government spokesman, said the government's ``first priority is to pass budget-related bills and deregulation bills as soon as possible.'' Share Buybacks
The Tokyo Stock Exchange said it has no plans to ask Japan's financial regulator to loosen rules governing the buying back of companies' own shares, denying an Asahi Shimbun newspaper report. The Asahi reported that the exchange would ask the Financial Services Agency to allow companies to purchase their own shares in the 30 minutes before the market closes. The report didn't cite anyone. Such late-day buying is banned because it may lead to stock price manipulation, the paper said. ``The stock market is at crisis level, but I don't think anything the government does at this late stage will make any difference,'' said Atsushi Ishii, who oversees 7 trillion yen at Tokio Marine & Fire Insurance Co. //www.quote.bloomberg.com