Japan finance chief to Daiei's defense


Japanese Finance Minister Masajuro Shiokawa kept quiet on the yen on Friday but praised Daiei's proposed bailout.

TOKYO, Japan -- Ministers lined up to praise and defend the politically sensitive rescue of debt-hobbled Daiei Inc. on Friday.

"The work under way with the banks involved for the rearrangement and rationalization is supported by the government," Finance Minister Masajuro Shiokawa said today.

He was joined in lending support for the deal by top diplomats such as Trade Minister Heizo Takenaka and Bank of Japan Governor Masaru Hayami.

Daiei, Japan's No. 1 supermarket company, announced a bailout late Friday to the tune of 420 billion yen ($3.2 billion).

Its three banks agreed to a debt-equity swap and other ways of bailing the company out, the company said Friday.

The much-leaked deal is being closely watched as a blueprint for restructurings of heavily indebted companies and for the banks' approach to dealing with troubled borrowers.

Moving the whole market

On the back of government support, shares in the debt-laden retailer soared, lifting Japan's whole market.

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Daiei jumped 30.95 percent to 175 yen, and optimism over the deal drove the Nikkei up 1.63 percent.

But that one-day rally did not stop Shiokawa voicing his concern over falling Japanese share prices.

"We have to consider whether the share prices are accurately reflecting corporate conditions," he said on Friday.

Shiokawa questioned whether the true value of companies was reflected in the market. But he admitted that he does not know what steps need to be taken.

He has said he is studying the market with interest. Shiokawa has been quick to downplay criticism that dismal share prices are the result of slow progress in the government's economic structural reform.

The government last year took various measures to bolster stock market activity, including tax breaks to retail investors and the start of a stock buying body to absorb massive cross-shareholdings from corporations.

Shiokawa did not discuss foreign-exchange rates on Friday, but he said this week the government is not deliberately depressing the rapidly weakening yen.

Committed to reform

That weakened above 133 to the dollar again on Friday, hitting 133.03. Currency experts say Japan's persistent economic woes are the ultimate cause.

The bailout of Daiei again raises questions about the government's commitment to tackling bad loans at its banks, which economists say is critical to Japan's economic revival.

A key creditor, UFJ Holdings, saw its stock fall 1.65 percent to 298,000 yen. Its other banks are Sumitomo Mitsui Banking Corp. and Fuji Bank.

Japan's banks have a history of trickling loans to unprofitable companies that some experts say should be left to fail.

"The Koizumi government is making the utmost effort to promote banks' bad loan disposal," Shiokawa said on Friday. "We have said that we will not hesitate to inject capital into banks if necessary."

With Shiokawa and others commending the efforts to restructure Daiei, the government is clearly not prepared to let the company fall, even though it is suffering ¥2,300 billion ($17 billion) of debts.

Shiokawa did have some positive comments on the economy. He expects wholesale prices to stabilize, which might ease the deflation plaguing the country.

"I think this will eventually lead to an upturn in consumer prices," he said in his speech.

Shiokawa has also said public spending could be used to turn around Japan's ailing economy. That has bond traders worried about a further bout of government-bond issues.