Eisuke Sakakibara, vice finance minister for international affairs, tried to calm markets Monday by clarifying comments carried in an interview late last week that major Japanese financial institutions might fail.
In an interview with Reuters Television, Sakakibara said there will be no banks with overseas operations collapsing in the foreseeable future, adding that the nation's banks are making aggressive efforts to write off nonperforming loans. The interview was monitored by other members of the press.
He stressed that the government remains determined to push forward with financial deregulation, adding that while such liberalization might lead to "a lot of movement" in the industry, it will be beneficial for the Tokyo market as a whole.
The government's financial stabilization scheme, which paves the way for up to 30 trillion yen in public funds to capitalize financial institutions and increase depositor insurance capacity, has made the financial safety net practically complete, Sakakibara added.
On Friday, his comments to Reuters TV were taken by markets to indicate that a major financial bankruptcy in Japan is possible, leading to a fall in the yen's value. Monday's interview was an effort to clear up the "misunderstanding," according to officials at the Finance Ministry's International Finance Bureau.
Sakakibara expressed confidence that the 16.65 trillion yen stimulus package unveiled Friday will take effect in July, and that the economy will experience a turnaround in six to nine months.
Permanent tax cuts are not included in the package as many had hoped, but Sakakibara stressed that public works spending will have more of an immediate effect on the economy.