Japanese Prime Minister Taro Aso's Cabinet members on Tuesday approved a plan to revise the industrial revitalization law, laying the groundwork for a program to publicly support companies finding it difficult to raise funds amid the global economic crisis.
Should the law be revised, the government-backed Japan Finance Corporation will be able to compensate a large portion of losses banks may incur after providing loans or investing in ailing companies outside the financial sector.
The government will set aside about 1.5 trillion yen for the emergency program, which will run through March 31, 2010.
By creating such a guarantee program, the government is hoping to make it easier for banks to finance firms that have trouble raising capital in the wake of the crisis.
Under the program, the state-owned financial institution would likely compensate between 50 per cent and 80 per cent of possible losses on loans or investments by the Development Bank of Japan or commercial banks, according to the Ministry of Economy, Trade and Industry.
The government-affiliated development bank or other banks, which could also join in the initiative, will use their own money to buy shares in companies that have been approved by the ministry as needing special assistance, based on criteria of the industrial revitalization law.
Companies that would be eligible for the special program would only be those having growth potential, a great impact on the job market and deep ties to regional economies, according to the ministry.
The program, therefore, is mainly targeting big companies, ministry officials said.