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Japan gov’t offers capital to non-financial firms

The Japanese government will buy shares in companies whose capital is seriously hurt by the financial crisis, the Ministry of Economy, Trade and Industry said, in a new move to ease the credit crunch.

Japan is already, like other countries, offering funds to help banks but the plan to boost firms' capital extends the assistance to others caught in a squeeze in the credit markets.

“This will be positive, but it's hard to say how much - after all, the details came out in news reports at the weekend,” said Noritsugu Hirakawa, a strategist at Okasan Securities.

“Also, we're facing the peak of the earnings season later this week, and it will be hard to actively buy stocks until we're through this and see how it went.”

Tokyo's benchmark Nikkei share average rose 3.5% in the morning session, as a weaker yen boosted shares in Japan's key exporters.

A trader for a European bank said the news could bolster risk appetite for investors, giving stocks a further boost and hurting the yen, widely seen by investors as a safe haven when the outlook is bleak.

The dollar rose 0.5% to ¥89.57, and the euro climbed 0.9% to ¥118.50.

The capital will be provided only while the companies are facing difficulty in fund-raising due to market turmoil, and firms receiving the funds will be required to draw up plans to boost profitability within three years, the ministry said.

“We're not specifying any sectors. Our ministry looks at manufacturers and companies in the service sector, but firms that are in the scheme aren't limited to the sectors that our ministry oversees,” a METI official said.

The government will invest in firms by buying shares, but the government has not yet decided what class of shares it would buy, the official said.

The official added that the scheme would be open to both listed and unlisted companies. (Reuters)