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The government is likely to provide 33 percent of the funds for a proposed stock-buying body at the center of plans that will help banks divest themselves from the stock market, a senior official from the Liberal Democratic Party said Tuesday.

The plans also call for urging banks to unwind their cross-held shares within three years.

Cross-held shares are widely seen as artificially sustaining corporate share prices. Recent massive share sales by financial institutions have been blamed for the ongoing slide in Tokyo stock prices, and the government is seeking a way to keep banks afloat by unwinding their plummeting holdings without further injuring share prices.

“The government is likely to supply one-third of the funds, becoming the top stakeholder,” said Hideyuki Aizawa, who heads an LDP committee working on the government’s emergency economic package.

Aizawa, a former top finance bureaucrat, once served as chief of the Financial Reconstruction Commission.

The coalition parties — the LDP, New Komeito and the New Conservative Party — compiled their own version of an emergency economic package last month in which a private-sector stock-purchasing body would be established with contributions from banks and other private-sector firms.

Finance Minister Kiichi Miyazawa has suggested that the government may advance money if the stock-buying body incurs losses.

Aizawa said the LDP will propose that the body’s purchases be limited to shares held by banks.

He said the combined value of shares to be purchased through the plan should be about 10 trillion yen, and that the body may ask for special loans from the Bank of Japan if it runs out of funds.

The share-buying body would be established in the fall, following the introduction of necessary legislation during the current Diet session.

The LDP panel also agreed that banks would be given about three years to rid themselves of outstanding bad loans to corporate borrowers.

The government and the ruling coalition will unveil the emergency economic package today, which will also include measures to boost liquidity in the real estate market.

No bad-loan budget

Finance Minister Kiichi Miyazawa reiterated Tuesday that he does not intend to compile a supplementary budget for fiscal 2001 to ease pains stemming from the proposed disposal of bad loans held by Japanese banks.

“I am not currently thinking about that,” Miyazawa told a regular news conference.

Miyazawa was referring to a government plan that will be included in an emergency economic package to be unveiled as early as today to accelerate banks’ bad-loan disposals.

Politicians have called for extending fiscal measures to establish a safety net to deal with unemployment, which is expected to increase as banks write off their bad debts.

Miyazawa said employment provisions have already been made through a series of economic stimulus measures and that a safety net is unnecessary because unemployment and corporate bankruptcies are unavoidable consequences of bad-loan disposals.

Meanwhile, asked if he believes there has been a change to the U.S. government’s strong-dollar policy, Miyazawa replied that as far as he was concerned the policy remains the same.

“Nobody (in the U.S. administration) has said differently,” he said.

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