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The Diet on Wednesday approved a revision to the industrial revitalization law, enabling the use of public funds to recapitalize nonfinancial companies amid the global economic crisis.

The House of Councilors endorsed the bill to revise the law during a plenary session, and the new measure will take effect possibly by month’s end.

Under the revised legislation, the state-controlled Development Bank of Japan will invest in companies meeting certain requirements on condition that the government cover 50 percent to 80 percent of possible investment losses should they fail.

The maximum coverage for total losses is set at ¥1.6 trillion in the proposed extra budget for the fiscal year that began April 1. The injection of taxpayer money is estimated at several tens of billions of yen per corporation.

The new program is to be applied primarily to large corporations with operations in many parts of the country to minimize the impact of the recession on regional economies.

Chip maker Elpida Memory Inc. and electronics maker Pioneer Corp. reportedly intend to take advantage of the new program, while Hitachi Ltd. and Toshiba Corp. may also follow suit.

Firms eligible to receive capital injections from the DBJ will have to meet specific requirements, including having 5,000 or more employees in Japan, having experienced sharp sales declines due to the effects of the financial meltdown and being likely to improve productivity within three years.

Parts vendors that supply at least 30 percent of components that are critical to the manufacturing activities of large firms can also apply.

The government will not raise the issue of the responsibility of top managers for letting their businesses seriously deteriorate when they call for public funds.

“There is a pressing need to pump funds into companies and offer other forms of assistance when they are in an unprecedented predicament,” Chief Cabinet Secretary Takeo Kawamura said. “But we have also discussed that there should be no moral hazard when the government hands out the money to companies as requested. So it is important to salvage the industry, bearing that in mind.”

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