Raw Japan
Slices of Japanese business, politics and life
Government stock rescue?
Japanese stocks are sinking towards levels unseen since 1982, sending alarmed government officials scurrying to come up with some way of propping them up.
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 allure of free money
People say there’s no such thing as a free lunch. But in theory, a government can have one, some economists and Japanese politicians say, if it wishes to save the economy from deflation and recession. It should just print money and then spend it.
In the past few weeks, some members of Japan’s ruling coalition as well as economists have proposed such a move as the spectre of deflation looms in Japan, now amid what is likely to be its longest economic contraction in modern times.
What can the Bank of Japan do?
Japanese interest rates have already dropped to just 0.1 percent, leaving the Bank of Japan with few traditional weapons to fight its corner of the global financial crisis as it meets on Wednesday and Thursday this week to review monetary policy.
It could, of course, return to zero interest rates, but Japanese policymakers are not convinced that this worked last time they tried it and, with rates already so low, how much difference would moving to zero make?
