A Liberal Democratic Party task force expressed its support Thursday for the principles of a plan to set up a 10 trillion yen fund through bond issues to help protect depositors.

The group also decided to consider working the idea into the party's financial stability package, to be formally unveiled next Tuesday. But details concerning the actual amount of public money to be utilized and how it would be raised were left to the panel's leader, former Prime Minister Kiichi Miyazawa, who is responsible for finalizing the details by Monday.

Miyazawa is expected to discuss with Finance Ministry officials ways in which public funds could be collected without inflicting more damage on the nation's coffers. Former Chief Cabinet Secretary Seiroku Kajiyama, who put forward the 10 trillion yen fund proposal, explained the idea to the panel, pointing out that it will involve the issue of a new type of government bond with government-held shares as collateral. "It is necessary for lawmakers to show our clear position that stabilizing the financial system is most important for our economy by stating a concrete figure such as 10 trillion yen," he was quoted as saying.

Participants said Kajiyama explained that in principle, the money should only be used to protect depositors after a financial failure, but added that there should be exceptions in the event the collapse of an ailing financial firm threatens to adversely affect the economy of the region it serves.

In such a case, public funds should be used, under certain conditions, to help avert a failure, according to Kajiyama. He added that it was equally important to make financial firms disclose information about their operations and to clarify the responsibility of management and regulators, if public funds were to be used. Kajiyama stressed that it is important to send a strong message to the public, but he said he was willing to leave details up to the task force to decide.

Panel members indicated that the amount of money the government would inject into the financial sector would not be substantially lower than 10 trillion yen, given the fact that Kajiyama's proposal was greeted favorably in financial markets.

Prime Minister Ryutaro Hashimoto's instructions to LDP executives on Tuesday to consider Kajiyama's proposal triggered a 554-point rally in the key Nikkei average on the Tokyo Stock Exchange. However, the rise was more than offset by share price falls Wednesday and Thursday as skepticism increased among market players wondering whether the scheme is actually feasible.

Prior to the panel meeting, Kajiyama also explained to top LDP officials that his proposal would not run counter to the government's efforts to substantially reduce its fiscal deficit and stop issuing deficit-covering bonds by fiscal 2003. Skeptics have said the bond issues would only be a new type of deficit-covering bond to pave the way to secure more revenue. In fact, many LDP legislators have already begun suggesting that the money raised through the bonds be used for a wider range of purposes such as public works spending.

Earlier in the day, Hashimoto and LDP Secretary General Koichi Kato agreed that such a fund, if adopted, should be used solely for coping with the current financial crisis, which is seen as a key factor behind the economy's weakness.