Japan said on Jan. 27 it would inject public funds into ailing companies to help them through the global economic crisis. The latest effort to ease a credit crunch in Asia's biggest economy came as Japan's top securities firm Nomura Holdings posted a quarterly loss of $3.8 billion because of the financial meltdown.
In parliament, meanwhile, political wrangling held up the enactment of a $54 billion- extra budget to fight the recession as the ruling coalition and opposition clashed over cash handouts.
Japan has already offered financial lifelines to banks hit by the worst financial crisis since the Great Depression. Now it plans to channel funds to other industries through state-backed lenders in a scheme local media said could be worth 1.5 trillion yen (US$17 billion).
"The plan would ensure companies operate smoothly," said a trade and industry ministry official.
Companies eligible for the bailout scheme include major companies that are likely to recover from the recession as well as firms that are vital to regional economies, officials said.
Tokyo's Nikkei stock index soared 4.9% as investors responded positively to the news, which came as Washington pushed ahead with efforts to revive the U.S. economy, confirming Timothy Geithner as Treasury secretary. "Markets welcomed the plan as it would mean that capital would flow to companies and the economy. Fears that companies may go bankrupt eased," said Okasan Securities equity strategist Hideyuki Ishiguro. "With the U.S. pressing ahead swiftly on its policy measures, Japan is giving a sign that it is moving to put its finances to work," he added.
But the market rally may be short-lived as "economic conditions in general remain severe and the plan is unlikely to revive the economy in the mid and long term," said Ishiguro.
Japanese companies have been severely affected by the global economic downturn, which has pushed the world's second largest economy into its first recession in seven years. A survey released on Jan. 27 said 400,000 temporary workers in Japan's manufacturing sector are expected to lose their jobs by the end of March.
Japan has an estimated one million non-regular employees in the manufacturing sector, of which 20% have already lost their jobs, according to the joint survey by a labor association and an outsourcing group.
Automakers are among the hardest hit. Honda Motor Co. said it would roll back production further in Japan and North America, although it is stepping up output in China, where demand is still growing despite the global economic crisis.
Copyright Agence France-Presse, 2009
