Raw Japan

Slices of Japanese business, politics and life

Government stock rescue?

February 26, 2009

Japanese stocks are sinking towards levels unseen since 1982, sending alarmed government officials scurrying to come up with some way of propping them up.

MARKETS-JAPAN-STOCKS Officials are looking at steps to support stocks after the plunge, which has taken the benchmark Nikkei to within sight of a 26-year low hit last October.

That slices into the value of huge share portfolios held by Japanese banks and erodes their capital just when the economy needs them to boost lending.

Among proposals being considered is setting up a stock-buying agency as Japan did in the mid-1960s, which follows another plan for the government to buy up to 20 trillion yen in shares from banks — a plan currently stalled in parliament.

The latest suggestion, in a newspaper on Thursday, is for the Bank of Japan to be pushed into buying stock exchange-traded funds.

Though market players say stock buying by government agencies might help a little, most remain wary with the Japanese market slide part of a global criiss.

MARKETS-JAPAN-STOCKS/“These stock plans may buy a bit of time, but without enacting a decisive economic stimulus package simultaneously they won’t be really effective,” Takahiko Murai, general manager of equities at Nozomi Securities, told me.

Others are harsher, noting the dire economic state and paralysis in a divided parliament under unpopular Prime Minister Taro Aso, with an increasingly strong opposition determined to delay policy as it eyes an election soon.

“We don’t need more money,” said one fund manager. “We need a change of leadership.”

The Nikkei gave all the proposals a cold shoulder and edged down on Thursday, bringing its losses — after the worst post-War decline ever last year – for calendar 2009 to more than 15 percent, on top of a record 42 percent slide last year.

Photo credits: Kim Kyung Hoon


In America they are investing in the banks and lending enormous amounts of money as well. In Japan they have already lent hundreds of billions of dollars to Japanese bands and now they are considering investing in stocks as well. I have been running a small business for the past 20 years in Japan. I have leased and finance numerous pieces of capital of equipment for my co. and paid all of them off. Today I finally decided to support the Japanese economy in a small way and I decided to lease a 700,000 yen office printer for business purposes. I was not only refused by several lease co.s that I have used in the past but I was refused by several others. The government would do better to set up a small business direct lending corporation and lend money directly to small entrepreneurs such as myself that have proven over the last 20 years that we are not only responsible but that we have field tested successful and sustainable business models. Investing in failed mega co.s and banks that reaped record profits in the good times and now step in line for a free gravy train ride is ridiculous. In good times large mega corps. take nothing but advantage and destroy the back bone of the economy which is the small businessman. They always claim that this is a natural course of events in a capitalist society. Then when it comes time to put capitalism to the test they want to be socialists. I say let the mega corps. fail and let their salaried ranks struggle in bread lines and hang out at soup kitchens. A little bit of insecurity is the foundation of ingenuity and innovation. Supporting these large institutions with public investment will lead to more long term stagnation and recession. It’s time for some of the giant trees in the forest to fall so that little energetic saplings can grow upon their provided nutrients. This is a natural course o capitalism. What is good for the goose is good for the gander, I say.

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