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The Nikkei average on the Tokyo Stock Exchange plummeted Monday to a new postbubble low as ambiguities in last Friday’s deal on financial stabilization measures between leaders of the Liberal Democratic Party and the opposition camp ignited disappointment among market traders.

The key index closed the day at 13,597.30, down 385.82 points from Friday.

The International Monetary Fund later Monday issued a report urging Japan to aggressively use public funds to bolster the capital of ailing major commercial banks.

Any further delay in stabilizing the financial system will trigger an additional plunge in the yen’s value and increase pressure on China and other Asian countries to devalue their currencies, the IMF said in its International Capital Markets report.

While there are various risks and uncertainties in the global capital market, Japan’s economic weaknesses and banking problems present the biggest risks in an already turbulent market, the IMF report says.

The prompt and effective injection of public capital into financial institutions before their collapse will boost the macroeconomic effects of fiscal and financial policies, it says.

Of the problems to be resolved to stabilize the nation’s financial system, banks’ disclosure of problem loans still remains unsatisfactory, the IMF said.

Regarding the ailing Long-Term Credit Bank of Japan, Prime Minister Keizo Obuchi said he will tell U.S. President Bill Clinton that Tokyo will strive to keep it from collapsing and thereby affecting the global financial market.

LTCB should not be allowed to fail, Obuchi told reporters while on his way to New York, where he is to meet with Clinton on Tuesday. Obuchi arrived in New York on Sunday afternoon, beginning a three-day visit to the United States. “LTCB’s collapse would have a major impact on financial institutions around the globe, given the size of LTCB and the Japanese economy,” Obuchi said.

Earlier on Monday, Chief Cabinet Secretary Hiromu Nonaka told a news conference that the existing scheme using the 13 trillion yen fund will be applied to major banks until the new financial bills based on the LDP-opposition accord is enacted.

The emerging differences between the LDP and the opposition over the interpretation their basic agreement on financial stabilization bills made the fate of the measures uncertain, as leaders of the opposition camp expressed anger with weekend remarks by LDP executives who indicated that the injection of public funds into LTCB remains possible.

Officials of the LDP and opposition parties met briefly at noon Monday but failed to move their discussions further, according to participants.

The LDP proposed holding a higher-level meeting involving policy affairs chiefs to work on new measures to be taken before major banks failed, but the opposition parties rejected the idea.

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