Stepping into a political minefield, Prime Minister Junichiro Koizumi decided Saturday that the government would temporarily nationalize Ashikaga Bank, currently part of the Ashikaga Financial Group Inc.
The move -- prompted by the bank being declared insolvent by auditors -- will wipe out shareholder capital and mean the government taking a 100 percent equity stake in the local lender.
"We must proceed with both bad loan disposal and economic recovery simultaneously," Koizumi said, following an emergency meeting Saturday night. "We will take measures to prevent confusion or uncertainty, and I believe the markets will respond calmly."