Finance Minister Kiichi Miyazawa on Wednesday defended the planned use of additional public funds to sell Long-Term Credit Bank of Japan to a consortium led by Ripplewood Holdings L.L.C. of the United States, calling the burden nothing new.

The Financial Reconstruction Commission made a formal decision on the matter Tuesday afternoon. By the end of the year, if all goes as planned, LTCB will be the first major Japanese commercial bank under foreign ownership.

LTCB was declared bankrupt with heavy losses under massive bad loans and placed under temporary state control last October.

"The nationalization scheme had assumed (some burden on taxpayers) from the beginning," Miyazawa said in a regular news conference.

The FRC estimates some 4 trillion yen in public funds will have to be used to cover LTCB's capital deficit and other losses. Miyazawa said, "Much of the cost would have inevitably been accrued under this kind of scheme no matter who took over the bank."

The 4 trillion yen includes some 3.6 trillion yen to cover the capital deficit and expanded losses stemming from sales of bad loans to Resolution and Collection Corp., the state-backed debt-collection firm. Several hundred billion yen more is expected to be needed to write off all of LTCB's bad loans, according to the FRC.

Separately, the government intends to pump 240 billion yen in public funds into the rejuvenated bank to reinforce its capital base. This capital injection will be made through the government's acceptance of new preferred shares issued by the bank. The FRC hopes to sell the shares in the future and earn a profit.

Meanwhile, Prime Minister Keizo Obuchi on Wednesday praised the FRC for singling out the Ripplewood-led consortium.

"The commission has taken a big step forward toward actualizing a speedy acquisition of the Long-Term Credit Bank of Japan" by the Ripplewood-led group, Obuchi told reporters. "I thank the members of the Financial Reconstruction Commission for deciding to give priority to talks with the group as the result of serious deliberations on the envisioned sale.

"I hope the members will continue to make efforts" to realize the sale of the nationalized bank to the consortium, he said.

Meanwhile, Chief Cabinet Secretary Hiromu Nonaka expressed hope that the FRC's decision to sell the bank to a foreign investor group will help bring stability to Japan's financial system.

"I believe this decision helped people to view the future of the Japanese economy through a positive perspective," Nonaka said during a regular press conference.

Commenting on the estimated 4 trillion yen in Japanese taxpayers' money required for the sale, Nonaka said the commission should keep making efforts to gain public understanding of the scheme.

"I hope the scheme will be carried out while meeting the public's expectations for creating a stable economy," he said.