Tokyo - Japan plans to make available billions of dollars in public funds to companies outside the financial sector in an unprecedented move to help them through the global economic crisis, local media reported yesterday.
The government aims to earmark several hundred billion yen during the current fiscal year to March 31, the Nikkei financial daily and Kyodo news agency reported. The funding will likely be extended in exchange for non-voting preferred stock, they said.
Such a scheme would add to government and Bank of Japan efforts to keep the country from sliding deeper into recession as the global credit crisis hurts exports, and banks tighten on corporate lending.
The government has mapped out a stimulus package while the central bank cut interest rates to near zero and decided to buy commercial paper and other corporate debt to ease tightening financial conditions.
The Nikkei said the Development Bank of Japan would screen firms seeking funds and provide capital infusions, while the Japan Finance Corp, a public lender, would raise funds via loans from the government or the market with state-backed guarantees.
Japan has injected capital into the banking sector in the past but the proposed framework to assist non-financial firms would be the first of its kind, the paper said.
The Development Bank of Japan would target firms with growth potential, specifically those with broad connections to peripheral industries and
play an important role in regional economies, the Nikkei said.
The government will gauge economic conditions to determine when to terminate the infusions, the paper said.
Japan, like the United States, is already in recession, with companies such as carmakers Toyota, Honda and Nissan slashing output as consumers tighten purse-strings worldwide.
Executives at Nissan, Japan's No. 3 automaker, have been among the most vocal proponents within the auto industry to ask for some form of government help to ease the pressure on dwindling cash flow. Nissan is likely to post a group operating loss of more than 100 billion yen for the year ending March 31, its first loss in 14 years, the Nikkei reported yesterday. Depending on car sales during the January to March quarter, it could even report a loss of double that amount, the Nikkei said without citing sources.
Manufacturers of auto parts, steel and other supporting industries are also facing major losses hit by slumping vehicle sales worldwide.
