<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published March 4, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Japan taps reserves to help firms facing credit crunch
Toyota the first to benefit with a US$2b loan from the initial US$5b taken from reserves
By ANTHONY ROWLEY
IN TOKYO
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IN a highly unusual move, Japan will dip into its foreign exchange reserves to help companies operating overseas that face funding problems. Motor industry giant Toyota will get US$2 billion of the initial US$5 billion taken from reserves.
The move is needed because even the state-owned Japan Bank for International Cooperation (JBIC,) which was earlier designated to make emergency aid available to stressed companies, is itself having trouble raising foreign currency.
'Taking into account the current severe conditions for those trying to procure foreign funds, we have decided to lend foreign currencies to JBIC as a temporary, extraordinary measure' if it has difficulty raising foreign currency from the markets, Finance Minister Kaoru Yosano said yesterday.
Japan has been conservative up to now in the use of its US$1 trillion foreign exchange reserves - the world's second largest after China's - which are invested mainly in US Treasury securities.
The fact that it is prepared to dip into them to aid corporate Japan is a measure of how serious the global funding position has become. Loans made by JBIC using the reserves are expected to be extended up to the year 2010. Japanese companies operating overseas are having trouble raising foreign currency finance because of the virtual seizing-up of credit markets, with even the biggest of them, such as Toyota, unable to access funds, analysts say.
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</TD></TR></TBODY></TABLE>Toyota's financial service unit, Toyota Financial Services Corp, said yesterday it was seeking a loan from the government to help it shore up its finances. Toyota's European unit is, meanwhile, preparing to submit a funding request to the European Investment Bank to finance research and development into clean technology.
Domestically too, many Japanese firms are having trouble funding their operations because banks are reluctant to lend at a time when their own balance sheets are damaged by the falling value of shares they hold.
With this in mind, the Finance Ministry also announced yesterday that it will raise the ceiling on JBIC's yen-denominated lending by 50 per cent to 1.2 trillion yen (S$19 billion). At the same time, lending by another state agency, the Japan Development Bank, to large and medium-size corporations will be increased by 50 per cent to 1.5 trillion yen.
The authorities are trying a number of unconventional approaches to help ease the strain on Japanese companies, financial institutions and on the stock market.
The Bank of Japan (BOJ) has promised to buy up to one trillion yen of stocks from Japanese banks to help ease their balance sheets strains and to shore up their capital. BOJ is also under pressure from the government to buy exchange traded funds on Tokyo stocks to help shore up share prices in general.
Another recent example of Japan's growing flexibility in the use of its official foreign exchange reserves was a US$100 billion loan by Tokyo to the International Monetary Fund to help support the fund's operations.
This was in line with Japan's cautious approach, however, since the IMF bears the credit risk on any loans made using the Japanese funds and Japan is protected against currency risk because such loans are denominated in IMF Special Drawing Rights, officials say.
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Japan taps reserves to help firms facing credit crunch
Toyota the first to benefit with a US$2b loan from the initial US$5b taken from reserves
By ANTHONY ROWLEY
IN TOKYO
<TABLE class=storyLinks cellSpacing=4 cellPadding=1 width=136 align=right border=0><TBODY><TR class=font10><TD align=right width=20>
</TD><TD>Email this article</TD></TR><TR class=font10><TD align=right width=20>
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The move is needed because even the state-owned Japan Bank for International Cooperation (JBIC,) which was earlier designated to make emergency aid available to stressed companies, is itself having trouble raising foreign currency.
'Taking into account the current severe conditions for those trying to procure foreign funds, we have decided to lend foreign currencies to JBIC as a temporary, extraordinary measure' if it has difficulty raising foreign currency from the markets, Finance Minister Kaoru Yosano said yesterday.
Japan has been conservative up to now in the use of its US$1 trillion foreign exchange reserves - the world's second largest after China's - which are invested mainly in US Treasury securities.
The fact that it is prepared to dip into them to aid corporate Japan is a measure of how serious the global funding position has become. Loans made by JBIC using the reserves are expected to be extended up to the year 2010. Japanese companies operating overseas are having trouble raising foreign currency finance because of the virtual seizing-up of credit markets, with even the biggest of them, such as Toyota, unable to access funds, analysts say.
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Domestically too, many Japanese firms are having trouble funding their operations because banks are reluctant to lend at a time when their own balance sheets are damaged by the falling value of shares they hold.
With this in mind, the Finance Ministry also announced yesterday that it will raise the ceiling on JBIC's yen-denominated lending by 50 per cent to 1.2 trillion yen (S$19 billion). At the same time, lending by another state agency, the Japan Development Bank, to large and medium-size corporations will be increased by 50 per cent to 1.5 trillion yen.
The authorities are trying a number of unconventional approaches to help ease the strain on Japanese companies, financial institutions and on the stock market.
The Bank of Japan (BOJ) has promised to buy up to one trillion yen of stocks from Japanese banks to help ease their balance sheets strains and to shore up their capital. BOJ is also under pressure from the government to buy exchange traded funds on Tokyo stocks to help shore up share prices in general.
Another recent example of Japan's growing flexibility in the use of its official foreign exchange reserves was a US$100 billion loan by Tokyo to the International Monetary Fund to help support the fund's operations.
This was in line with Japan's cautious approach, however, since the IMF bears the credit risk on any loans made using the Japanese funds and Japan is protected against currency risk because such loans are denominated in IMF Special Drawing Rights, officials say.
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