The government denied a news report Thursday that the Financial Services Agency is considering injecting public funds into regional bank Ashikaga Financial Group Inc.
"We are not in a situation to consider such a thing," Chief Cabinet Secretary Yasuo Fukuda, the top government spokesman, told reporters.
He was commenting on a report in The Asian Wall Street Journal that the government is considering bailing out the bank to signal its resolve to revive the ailing financial system.
The Journal reported Thursday that a bailout of the regional would send a strong signal that Prime Minister Junichiro Koizumi's government is determined to press on with cleaning up the nation's banks.
The newspaper quoted a regulatory official involved in the discussions about the bank's future as saying that no decision has been made on what steps might be taken, what form a public-fund injection might take or how much money it might involve.
Ashikaga would be the second bank to be bailed out by the FSA this year, after Resona Bank received nearly 2 trillion yen in July.
The story was first carried Wednesday by Dow Jones Newswires.
Given the gravity of the situation, Koizumi himself may have to decide Ashikaga's fate, the regulatory official was quoted as saying in the news report.
But Koizumi told reporters Thursday, "I haven't heard of it."
The government may be aiming for a decision in time for the Nov. 25 release of the bank's interim earnings results, which the regulatory official said will reveal the extent of Ashikaga's problems, the newspaper said.
Ashikaga reported a 66.64 billion yen group net loss in the year ended March 31 due to huge stock-related losses and credit costs.