Finance Minister Masajuro Shiokawa said Tuesday his ministry would approve an anticipated request by the Bank of Japan to increase its capital reserves by funneling a bigger portion of the central bank's profits into its capital base.
This "will help (the BOJ) implement its own policies aggressively in line with the government's policy direction," Shiokawa said. "And I think that's good."
The central bank has not yet made a formal request to raise from 5 percent the ratio of profits it channels into its capital base, he said, adding that the exact percentage will be worked out during a BOJ meeting.
By strengthening its financial base, the BOJ will be more able to purchase risky assets.
The central bank began purchasing bank-held shares last year. This month, the BOJ's Policy Board decided to purchase asset-backed commercial papers issued by and to smaller firms, in line with the government's policy to stimulate the economy by helping small and midsize firms more easily raise funds.
Referring to the fact that the redirection of funds would mean the BOJ will pay less cash into state coffers, Shiokawa said, "We can think of it in a more flexible manner."
Under the current Bank of Japan Law, the central bank's profits are funneled into state coffers as nontax revenue after setting aside 5 percent for its capital base.
The arrangement to allocate more funds for the BOJ's capital base would apply to the profits the central bank earned in fiscal 2002.
The BOJ will have to consult with the ministry every year if it wants to continue funneling more than 5 percent into its capital base, Shiokawa said.