The Bank of Japan will spend 1 trillion to buy shares of financial institutions

The Bank of Japan has announced that it is going to spend up to 1 trillion yen that is approximately $11.5 billion in 2010 to purchase the shares held by financial institutions. To implement its plan the bank needs to get a permission of the Ministry of Finance. The bank management is sure that such actions will revive Japanese banks and improve their financial position. By the time when the bank has made such statement Japanese stocks ended lower in Tokyo, however after it the prices went up.  

The community reacted skeptically to such statement since the leading analysts are such that the allotted funds are not significant to influence the economy however everybody agrees that such measures can help to stop the national currency fall. 

It was announced that the central bank will purchase only with a rating of BBB- or higher. The shares need to have been traded for a minimum of 200 days per year and have annual turnover of 20 billion yen. Eligible banks include those whose stock holdings exceed 50% of its Tier-1 capital and whole total holdings are greater than 500 billion yen. The exact date of program start is not known. It’s necessary to add that it is not the first time the banks practices such purchases. So, last time the central bank had run a similar share-purchase program, it spent 202 billion yen buying up shares from financial institutions during the 22 months ended in September 2004. At the time, the central bank had pledged to buy as much as 3 trillion yen of shares. 

The Bank of Japan began disposing of its holdings in October 2007 but suspended the program during the market slump last fall. The central bank held 1.273 trillion yen of shares as of September 2008, it said in the statement.

Source: Market Wire