/www.bloomberg.com/ By Mayumi Otsuma
Tokyo, March 14 (Bloomberg) -- Japanese Prime Minister Junichiro Koizumi will meet new central bank governor Toshihiko Fukui today as pressure mounts on the Bank of Japan to join the government in acting to spur the economy and bolster stocks.
The gathering, which will include the main economic ministers, is likely to be held late this afternoon or early this evening, Kyodo News agency said.
``It is just natural to have thorough discussions with the government,'' Fukui said after winning confirmation as governor from Japan's parliament this morning. He declined to elaborate.
Japan's ruling coalition is urging the Bank of Japan to expand its purchases of shares held by banks beyond the current 2 trillion yen ($16.9 billion) planned by September. The call is part of measures proposed by the government and its coalition parties to shore up stock prices before companies end their business year at the end of the month.
``We'll ask (the BOJ) to expand its purchases,'' Hideyuki Aizawa, who heads the anti-deflation panel of Koizumi's Liberal Democratic Party, said yesterday, without specifying a total.
Yasuo Fukuda, chief government spokesman, confirmed the Fukui-Koizumi meeting today.
Fukui said key legislators he met in parliament hadnЖt discussed the possibility of the BOJ buying more shares or Japan's foreign exchange policies. The current Bank of Japan Governor Masaru Hayami ends his five-year term on March 19.
Nikkei
The Nikkei 225 Stock Average had dropped for six days, extending losses to about 10 percent in the past month, to close on March 11 at its lowest since January 1983. The drop further eroded the capital of Japan's banks, which own more than $178 billion of shares.
The Nikkei 225 today rose as much as 2.2 percent and traded at 8007 as of the midday break in Tokyo, up 1.8 percent for the day.
Fukui will take over as BOJ chief as the government steps up efforts to revive investor confidence ahead of a possible U.S.-led war on Iraq. Companies and some members of the ruling Liberal Democratic Party are also demanding extra spending on the economy and for the central bank to buy more shares.
Heizo Takenaka, the Financial Services Minister, today told reporters that the government won't curb the BOJ's independence. Takenaka, who said the ruling coalition had approved his ministry's proposals to stem share price declines, added that the bank may also be asked to take extra measures to help the economy and spur stocks.
BOJ Spending
Japan's ruling parties want the amount spent on stocks by the central bank doubled to 4 trillion yen and is urging the central bank to buy foreign bonds, exchange-traded funds, and real estate investment trusts in addition to stocks as it seeks to shore up banks' finances, the Nihon Keizai newspaper said.
Finance Minister Masajuro Shiokawa today said the government can't infringe on the bank's independence by requiring foreign bond purchases.
The Financial Services Agency, Japan's financial regulator, said yesterday it plans to give banks more time to sell their shareholdings and will make it easier for companies to buy back stocks.
The agency also told brokerages and banks to monitor short sales -- selling borrowed stock to profit from a decline, a senior official said.
In addition, restrictions on companies buying their own shares will be eased for three months, the FSA said. Companies are now banned from buying their own stock in the 30 minutes before the market closes because the purchases may lead to share-price manipulation.
Top Lenders
Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc. and Japan's five other top lenders held 21 trillion yen of shares as of Sept. 30. According to previous plans, the government had intended to force banks to reduce their holdings of shares to less than the level of their capital by Sept. 30, 2004. That requirement, which would leave them with about 5 trillion yen of shares, may now be extended by two years to Sept. 30, 2006, according to the Financial Services Agency.
The proposals are ``part of the government plan to avert a financial crisis,'' Koizumi said yesterday.
Stock losses at Japan's seven largest banking groups increased to 5.84 trillion yen as of March 7, more than double the 2.86 trillion yen they held at the end of September 2002, according to Daiwa Institute of Research.
Some investors want signs that the new Bank of Japan governor Fukui will also do more to help the economy avoid a recession.
``Given the current state of the Japanese economy, the Bank of Japan can't avoid looking into new policy steps beyond what it has done so far and exploring non-traditional policy tools,'' said Mamoru Yamazaki, chief economist at Barclays Capital Japan Ltd.
Of the 2 trillion yen the BOJ has to purchase stock, it had spent 906 billion yen on shares as of March 10.