In what some analysts see as a transparent effort to prop up embattled Prime Minister Yoshiro Mori, Financial Reconstruction Minister Hideyuki Aizawa and LDP policy chief Shizuka Kamei agreed Tuesday that banks should be urged to stop unloading their cross-held shares.
Later in the day, Aizawa told Mori of his intention to call on banks to hold back on selling off their cross-holdings.
"Stock prices are too low, and we cannot stand around idle," Aizawa, who also heads the Financial Reconstruction Commission, later told reporters.
After meeting Kamei, Aizawa said that although the request will not constitute "gyoseishido" (an administrative directive), they expect banks to respect the views of the government and the ruling party.
However, in the clearest wording from the government on the issue so far, Chief Cabinet Secretary Yasuo Fukuda told an afternoon news conference that the government has no plans to take any artificial measures to manipulate the stock market.
"We are not going to do anything that could affect the stock market," Fukuda said, effectively criticizing Aizawa and Kamei.
"It would be undesirable if (their agreement) was meant to affect the stock market," Fukuda said, adding that he was not aware of the details of what the two politicians discussed.
Aizawa and Kamei also agreed to ask the Bank of Japan and commercial banks for cooperation to ensure sufficient amounts of cash are on hand as the yearend nears.
While many industry officials acknowledge that their releasing of cross-holdings may put downward pressure on stock prices, effectively reducing their latent profits on stockholdings, some industry sources appeared perplexed at the idea of holding on to them due to outside pressure, saying that it would run counter to another government desire to see banks shore up their management bases.
With full-scale restructuring ongoing in Japan, banks are facing request upon request for debt waivers from companies in dire straits. What's more, they are rapidly increasing the amount of their bad-loan writeoffs as corporate bankruptcies continue to skyrocket.
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