Japan to help troubled companies
Written on January 29, 2009
Japan plans to use public money to help the companies hardest hit by the financial crisis, while newly confirmed U.S. Treasury Secretary Timothy Geithner vowed to act swiftly to rescue the U.S. economy.
Japan, like many other nations, has already committed funds to help banks and spur lending to cash-starved businesses and consumers, but the new plan extends the assistance to others caught in the credit squeeze.
The new initiative comes after Geithner and U.S. President Barack Obama assured lawmakers and markets that they would immediately get to work to protect the U.S. economy from the worst financial crisis since the Great Depression.
German corporate sentiment likely deteriorated to a fresh post-reunification low in January, data is expected to show later on Tuesday, due to weakening demand and production cuts.
The Munich-based Ifo economic think tank’s business climate index, based on a monthly poll of around 7,000 firms, probably fell to 81.3 in January from 82.6 in December, a Reuters poll of 50 economists showed. Such a low reading has not been seen since German reunification in 1990.
As expected, Japan’s biggest broker, Nomura announced its fourth straight quarterly loss, suffering a net loss of 343 billion yen ($3.8 billion) in the October-December period as the cost of buying some of Lehman Brothers’ business eroded earnings low fee payday loans.
But the government fund injection plan helped Tokyo shares extend their gains, with the Nikkei average closing up 4.9 percent at 8,061.07, its biggest one-day gain in six weeks.
The dollar and euro also rose against the yen
To qualify for the funds, firms must have plans to boost profitability within three years and the offer would last while market turmoil hampered fund raising, METI said.
ELECTIONEERING?
The world’s second-biggest economy is now struggling with its first recession in seven years. Japanese exports plunged in December by more than a third from previous-year levels and business sentiment has slumped to a record low.
Market players gave the plan a wary welcome, although some scented a whiff of election-year politicking at work.
“In light of the looming election, the government needs to help companies that are bleeding losses,” said Hiromichi Shirakawa, chief economist at Credit Suisse in Tokyo.
Unpopular Prime Minister Taro Aso’s ruling bloc is in danger of losing an election that must be held by October.
The government will inject the funds by buying shares, and no industries will be ruled out for injections, the ministry said.
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