Mitsuo Horiuchi, minister for international trade and industry, on Wednesday urged financial authorities to consider using public funds for an investment cooperative that would purchase corporate shares held by banks.
Horiuchi was reacting to Japan's credit crunch, which last week put Toshoku Ltd., a major food retailer, into bankruptcy proceedings and has sparked fears of more bankruptcies. With his plan, Horiuchi said, "banks' capital-to-asset ratios can be propped up without further hampering the stock market. And it will provide a quick solution to the credit crunch."
During an informal Cabinet meeting earlier in the day, he and Finance Minister Hiroshi Mitsuzuka discussed the need to solve the widening credit crunch. At a news conference following the meeting, Horiuchi expressed his appreciation for a range of counter-credit crunch measures proposed the same day by the Finance Ministry, such as providing certain flexibility in applying new capital-to-asset ratios.
But he added a problem remains that needs to be immediately addressed. "The interbank market is not properly functioning, with certain banks having difficulty raising funds," he said, noting that such a situation surrounding financial institutions is a major reason behind the ongoing credit crunch. "If we leave this situation unattended, the nation's economy will face a grave situation," he said.