Identifier
Created
Classification
Origin
08TOKYO2885
2008-10-16 09:05:00
CONFIDENTIAL
Embassy Tokyo
Cable title:
JAPANESE FOLLOW UP ON G-7 ACTION PLAN
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C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 002885
SIPDIS
E.O. 12958: DECL: 10/15/2018
TAGS: ECON EFIN JA
SUBJECT: JAPANESE FOLLOW UP ON G-7 ACTION PLAN
TOKYO 00002885 001.2 OF 002
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b) and (
d).
C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 002885
SIPDIS
E.O. 12958: DECL: 10/15/2018
TAGS: ECON EFIN JA
SUBJECT: JAPANESE FOLLOW UP ON G-7 ACTION PLAN
TOKYO 00002885 001.2 OF 002
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b) and (
d).
1. (C) SUMMARY: Finance Minister and Financial Services
Minister Shoichi Nakagawa released a statement October 14
outlining Japan's follow-up policies to its October 10 G-7
Action Plan. The Plan calls for relaxing rules on
corporate stock buy-backs, greater transparency in selling
short, and temporarily suspending further sales of public
equities by Japan's Bank Shareholding Purchase Corporation
(BSPC). Minister Nakagawa has also announced measures
aimed at boosting the availability of credit for Japanese
small- and medium-sized enterprises. On October 15,
Minister Nakagawa met with major and regional Japanese
banks and reportedly urged them to increase the flow of
capital. While the measures may have some economic impact,
there is a sense the SME measures are motivated as much by
electoral considerations as a response to the financial
crisis. END SUMMARY.
Stock Market Measures
--------------
2. (C) Minister Nakagawa announced three specific steps
October 14 that build upon the G7 Action Plan of October
10. The steps, which are relatively modest, are:
a) Relaxation of Rules on Corporate Stock Buy-Backs: Two
limits are relaxed. First, firms are now able to
repurchase shares up to the average daily trading volume of
the last four weeks (rather than only up to 25% as
previously allowed). Second, firms are able to repurchase
shares between 2:30 PM and the market close at 3:00 PM,
when there is likely to be a large impact on the closing
price.
b) Greater Disclosure of Short-Selling: Japan has had a
version of the uptick rule, which prohibits investors from
selling short at a level equal to or lower than the last
traded price, since March 2002. (The U.S. abolished its
uptick rule in June 2007.). Financial Services Agency
(FSA) officials have said privately that they did not feel
the need to introduce additional restrictions; their
principal concern was monitoring short-selling of Western
financial institutions that are dual listed in Japan.
c) Suspension of Sales of Public Equity Holdings: The Bank
Shareholding Purchase Corporation (BSPC) purchased JPY1.6
trillion in shares from 2002-06 in an effort to insulate
bank balance sheets from equity market volatility. The
BSPC has gradually sold off those shares since April 2006
and its holdings are now down to JPY 500 billion. The Bank
of Japan (BOJ) holds JPY 1.4 trillion in shares of the JPY
2.0 trillion it bought from 2002 to 2004. Upon Nakagawa's
request to alleviate further downward pressure, the BOJ
suspended its sales October 14.
Measures to Promote Lending to SMEs
--------------
3. (C) Nakagawa's other measures target Japan,s small and
medium size enterprises (SMEs). The perception is small
banks are refraining from lending to otherwise creditworthy
SMEs restricting their business operations. SME
creditworthiness aside, Japan,s smaller banks are weaker
today than the larger banks that were the focus of
government intervention between 1997-2004. Nakagawa,
therefore, has proposed reviving an expired 2004 law to
allow public capital injections into smaller banks.
Nakagawa convoked bank CEOs to a meeting October 15 to urge
further lending to SMEs; there are political benefits for
the LDP to this measure in the run-up to Lower House
elections.
4. (U) Lastly, in the wake of Yamato Life's bankruptcy, the
government has signaled it is likely to extend the current
life insurance Policyholder Protection Corporation, set to
expire in March 2009, including government financial
TOKYO 00002885 002.2 OF 002
support if private contributions fall short in resolving a
failed insurer.
SCHIEFFER
SIPDIS
E.O. 12958: DECL: 10/15/2018
TAGS: ECON EFIN JA
SUBJECT: JAPANESE FOLLOW UP ON G-7 ACTION PLAN
TOKYO 00002885 001.2 OF 002
Classified By: Ambassador J. Thomas Schieffer for reasons 1.4 (b) and (
d).
1. (C) SUMMARY: Finance Minister and Financial Services
Minister Shoichi Nakagawa released a statement October 14
outlining Japan's follow-up policies to its October 10 G-7
Action Plan. The Plan calls for relaxing rules on
corporate stock buy-backs, greater transparency in selling
short, and temporarily suspending further sales of public
equities by Japan's Bank Shareholding Purchase Corporation
(BSPC). Minister Nakagawa has also announced measures
aimed at boosting the availability of credit for Japanese
small- and medium-sized enterprises. On October 15,
Minister Nakagawa met with major and regional Japanese
banks and reportedly urged them to increase the flow of
capital. While the measures may have some economic impact,
there is a sense the SME measures are motivated as much by
electoral considerations as a response to the financial
crisis. END SUMMARY.
Stock Market Measures
--------------
2. (C) Minister Nakagawa announced three specific steps
October 14 that build upon the G7 Action Plan of October
10. The steps, which are relatively modest, are:
a) Relaxation of Rules on Corporate Stock Buy-Backs: Two
limits are relaxed. First, firms are now able to
repurchase shares up to the average daily trading volume of
the last four weeks (rather than only up to 25% as
previously allowed). Second, firms are able to repurchase
shares between 2:30 PM and the market close at 3:00 PM,
when there is likely to be a large impact on the closing
price.
b) Greater Disclosure of Short-Selling: Japan has had a
version of the uptick rule, which prohibits investors from
selling short at a level equal to or lower than the last
traded price, since March 2002. (The U.S. abolished its
uptick rule in June 2007.). Financial Services Agency
(FSA) officials have said privately that they did not feel
the need to introduce additional restrictions; their
principal concern was monitoring short-selling of Western
financial institutions that are dual listed in Japan.
c) Suspension of Sales of Public Equity Holdings: The Bank
Shareholding Purchase Corporation (BSPC) purchased JPY1.6
trillion in shares from 2002-06 in an effort to insulate
bank balance sheets from equity market volatility. The
BSPC has gradually sold off those shares since April 2006
and its holdings are now down to JPY 500 billion. The Bank
of Japan (BOJ) holds JPY 1.4 trillion in shares of the JPY
2.0 trillion it bought from 2002 to 2004. Upon Nakagawa's
request to alleviate further downward pressure, the BOJ
suspended its sales October 14.
Measures to Promote Lending to SMEs
--------------
3. (C) Nakagawa's other measures target Japan,s small and
medium size enterprises (SMEs). The perception is small
banks are refraining from lending to otherwise creditworthy
SMEs restricting their business operations. SME
creditworthiness aside, Japan,s smaller banks are weaker
today than the larger banks that were the focus of
government intervention between 1997-2004. Nakagawa,
therefore, has proposed reviving an expired 2004 law to
allow public capital injections into smaller banks.
Nakagawa convoked bank CEOs to a meeting October 15 to urge
further lending to SMEs; there are political benefits for
the LDP to this measure in the run-up to Lower House
elections.
4. (U) Lastly, in the wake of Yamato Life's bankruptcy, the
government has signaled it is likely to extend the current
life insurance Policyholder Protection Corporation, set to
expire in March 2009, including government financial
TOKYO 00002885 002.2 OF 002
support if private contributions fall short in resolving a
failed insurer.
SCHIEFFER