The decline of the Nikkei 225 stock average by more than 1,400 points Monday prompted the three ruling parties to ask the government to spend about 1 trillion yen on shoring up share prices.
In a joint position paper, the three parties said the government should respond to the fall in share prices by investing roughly 1 trillion yen that is currently held in “special money trusts.”
The idea, which was advocated by Shizuka Kamei, policy affairs chief of the Liberal Democratic Party, was presented to Chief Cabinet Secretary Mikio Aoki on Monday evening by Kamei and his counterparts from New Komeito and the New Conservative Party.
The special trusts, held by trust banks, are made up of funds from the postal savings program and the “kampo” insurance program. The government can instruct the banks to invest this money in selected areas, in this case shares.
Other actions the three parties urged the government to adopt in order to shore up the ailing stock market included bringing forward the implementation of public works projects earmarked for fiscal 2000; promptly spending a 500 billion yen public works reserve fund; and taking appropriate steps to prevent any sharp fluctuations in the currency market.
Aoki said the government will study the proposed measures, according to Chikara Sakaguchi, policy chief of New Komeito.
“This stock market tumble was triggered by the sudden plunge of stock prices in America,” Kamei said. “As our nation’s economy is about to enter its recovery stage, (the dive in Tokyo stock prices) is not reflecting (the real state of Japan’s) substantial economy. The fall this time is irrational and was caused by psychological factors from the U.S.”
Vice Finance Minister Nobuaki Usui, however, was cautious over the proposal, saying it is generally undesirable for the government to take action intended to directly affect stock prices.
He also said it is premature to consider a policy response for a single-day plunge in the Tokyo market.
“The first thing we must do is see how the U.S. stock market moves on Monday (local time)” because the ministry believes the Tokyo sell-off Monday was triggered by last week’s dive in New York stocks, he told a regular news conference in the late afternoon. “This is not the right time to spell out specific actions.”
“There are things that the government can do and cannot do” about stock prices, he added, effectively criticizing the ruling block’s proposal to use public money to boost share prices.
Meanwhile, some observers see the ruling parties’ proposal as coincident with their attempt to win public support prior to the next general election, expected to take place in June.
New Komeito’s Sakaguchi maintained that the government should initially try to maintain the economy’s progress by implementing more public works projects and that it should try to manipulate stock prices only if stock prices decline further.
Speaking at a news conference earlier in the day, Aoki said the government would seriously consider ways to bolster the stock market if the ruling coalition makes any proposals, while simultaneously monitoring the New York stock markets.