Japan offers money for troubled global financials

[October 14, 2008]  TOKYO (AP) -- Japan stands ready to offer money to any needed effort to inject capital into crumbling financial institutions around the world, the finance minister said Tuesday.

The comments from Finance Minister Shoichi Nakagawa comes at a time when worries are growing about a global financial system meltdown rippling from a credit crunch that started in the U.S. and has spread to Europe and beyond.

Washington has announced a $700 billion bailout program, and U.S. officials said Monday that some of that would be used to buy stocks in U.S. banks to shore up their capital base. Britain, France and some other European nations also announced overnight that they will use public money to buy up parts of their banks to prevent their collapse.

Japan's banks have so far been spared exposure to the U.S. subprime mortgage woes and their capital footing is believed to be solid.

But some Japanese politicians and experts are starting to say the growing global economic woes may be an opportunity for Japan, which has ample cash in currency reserves, pension funds and people's savings. The opportunity could include new overseas investments that might lead to ways to support the global financial system.

Nakagawa did not give details on how Japanese money may be used to salvage other nations' financials.

But he said Japan was prepared to provide money for any rescue effort hammered out by the 185-nation International Monetary Fund, which met over the weekend to talk about the global financial crisis.

Nakagawa said he told an Oct. 10 meeting of finance minister and central bankers from the Group of Seven industrialized nations that capital injection for financial institutions was crucial. The G-7 brings together the United States, Canada, Britain, France, Germany, Italy and Japan.

"I said the IMF must have a flexible and aggressive response to the crisis. And Japan is ready to contribute funds to the IMF if needed," he said in a statement.

Japanese politicians have been vocal lately about how the country overcame its own financial crisis in the 1990s after the burst of the "bubble" economy of speculative lending. They say quick action is needed and public money must be used to salvage the banking system.

Some lawmakers see what may be a recent loss of Wall Street's credibility could provide that sorely needed chance for Japan to raise its political and international business clout. Japan has long felt it has not asserted itself enough on the international stage.

As part of the Japanese measures to strengthen its own financial system, Japan relaxed regulations on companies buying up their own shares, a change that will help prevent takeovers and allow companies to prevent a nose-dive in their own issues.

Japan also promised to continue to protect people's insurance policies and savings accounts, and said it will consider capital injection into medium-size and small Japanese financial institutions.

But Nakagawa allayed any public fears about the health of Japanese banks and other financials.

"Our nation's financial system is in sound health, and we have sufficient safety nets in place," he said, promising continued vigilance about any possible fallout from declining stock prices.

Japan's stock market, which plunged by nearly a quarter last week, surged Tuesday as investors cheered moves by governments in the U.S. and Europe to buy stakes in financial firms to shore up their capital base.

[Associated Press; By YURI KAGEYAMA]

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