Development Bank of Japan to invest directly in firms?

January 27, 2009
By Ken Worsley

Earlier today, Bloomberg reported that the Japanese government is considering a plan that would allow the Development Bank of Japan to buy preferred and common shares in Japanese firms. According to the report, “The government will guarantee a portion of the investments should the companies go bankrupt.”

What portion would that be? The Nikkei reported the same day that public funds would be used to cover up to 80% of the investments. In case you’re worried that foreign firms might be the recipients of public funds, the Nikkei tells us that an unnamed METI official described the bailout like this:

Only companies that have deep connections to regional economies and growth potential would be eligible to receive the capital infusions from the Development Bank of Japan or other authorized banks.

METI minister Toshihiro Nikai stressed that the program is meant to ensure that private financial institutions are able to lend, rather than setting up a mechanism by which the government injects public funds.

Bloomberg tells us that the Development Bank of Japan will raise funds by selling bonds and tapping existing reserves of cash, rather than employing public funds directly to make investments in firms.

Filed Under Banking, Business