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Nikkei jumps on government plan Nikkei jumps on government plan
(about 1 hour later)
Japanese shares have risen after the government said it would use public funds to help companies struggling to cope with the economic downturn.Japanese shares have risen after the government said it would use public funds to help companies struggling to cope with the economic downturn.
Confirmation of the capital injection sent the main Nikkei share index up 378.93 points, or 4.93%, to 8,061.07. The 4.8 trillion yen ($54bn) capital injection sent the Nikkei index up 378.93 points, or 4.93%, to 8,061.07.
Aid will only be provided to companies that are facing difficulties raising funds because of the credit crunch.Aid will only be provided to companies that are facing difficulties raising funds because of the credit crunch.
Shares were also helped by a weaker yen, which helps to make Japanese exports more competitive overseas.Shares were also helped by a weaker yen, which helps to make Japanese exports more competitive overseas.
Improving profitabilityImproving profitability
"We want to support companies that we think are important for Japan and for regional economies, regardless of their size," said Economy, Trade and Industry Minister Toshihiro Nikai."We want to support companies that we think are important for Japan and for regional economies, regardless of their size," said Economy, Trade and Industry Minister Toshihiro Nikai.
"We're not specifying any sectors," added a ministry official. His ministry said the government capital will be provided by its affiliated banks buying shares in both listed and unlisted companies.
Japan's trade ministry said companies receiving funds would need to draw up plans to improve profitability within three years. "We're not specifying any sectors. Our ministry looks at manufacturers and companies in the service sector, but firms that are in the scheme are not limited to the sectors that our ministry oversees," added a ministry official.
Companies receiving funds will need to draw up plans to improve profitability within three years.
The announcement of the stimulus package marked the end of two days of deadlock in parliament between the government and the main opposition party.
Tight funding
"Bankruptcies have been increasing, and not only among financial firms. There have been reports that funding has been tight at many large corporations," said Soichiro Monji at Daiwa SB Investments."Bankruptcies have been increasing, and not only among financial firms. There have been reports that funding has been tight at many large corporations," said Soichiro Monji at Daiwa SB Investments.
Despite the boost to share prices, some analysts are unsure what impact the stimulus package will have on the wider economy.Despite the boost to share prices, some analysts are unsure what impact the stimulus package will have on the wider economy.
"I think we might see some speculative moves to buy shares and sell the yen, but it is unclear just how much such an injection of public funds would support the economy," said Tohru Sasaki at JP Morgan Chase."I think we might see some speculative moves to buy shares and sell the yen, but it is unclear just how much such an injection of public funds would support the economy," said Tohru Sasaki at JP Morgan Chase.
The government now wants to start a parliamentary debate on a record 88.5 trillion yen budget for the next fiscal year, starting in April.