The government of Prime Minister Ryutaro Hashimoto breathed a sigh of relief Monday after the House of Councilors approved two bills for stabilizing the financial system.

The Diet's Upper House plenary session voted in favor of the bills, which allow public funds to be used in injecting new capital into banks.

The bills will provide 30 trillion yen in government bonds and government loan guarantees to the Deposit Insurance Corp. so it can inject capital and fully protect deposits at failed banks until March 2001. The bills take effect immediately upon their promulgation, which is to come in a few days, according to government officials.

With the bills' passage, the DIC will also establish an in-house committee to screen financial institutions' requests to have their preferred stock or subordinated bonds purchased. The government purchases will help build up low capital bases at the chosen institutions.

The seven-member committee will include the finance minister, the governor of the Bank of Japan, the president of the DIC and the head of a financial supervision agency set to be formed by the end of June, as well as three people from the private sector.

The committee will formulate screening standards to be applied while deciding on whether to respond to requests by financial institutions. Any decision must be unanimous. Once the committee agrees to the capital injection, the individual cases must be approved by the Cabinet -- a process necessary since public funds would be used, according to Finance Ministry officials.

The ministry hopes to complete all the necessary paperwork so the first round of capital injection can take place before banks close their books by March 31, the end of the fiscal year.

The government is planning to inject fresh capital beginning with the relatively healthy banks and gradually expand its help to the smaller financial institutions to avoid creating confusion and panic by building up weaker banks first.

But the stronger banks, which can secure capital at a lower cost through other means, do not have much to gain from having the DIC buy their preferred stock. In addition, some banks named in the recent scandal involving the bribery of Finance Ministry inspectors may come under pressure if they receive public funds, even in the form of stock purchases.