Japan delayed the announcement on Thursday of a plan to help Tokyo Electric Power compensate victims of the crisis at its tsunami-crippled nuclear plant and save Asia's largest utility from financial ruin.
The scheme had been expected to be approved by Prime Minister Naoto Kan's cabinet but the prime minister said he wanted further discussion by the cabinet on Friday.
"We have been discussing the compensation scheme from the viewpoint of nuclear crisis victims rather than rescuing Tepco. On this point we see the need to discuss further and I would like to wait for discussions at tomorrow's cabinet meeting," Kan told reporters.
Ruling party lawmakers briefed on the plan had said it was designed to protect bondholders and would keep Tokyo Electric (Tepco) shares listed, although the utility would have to forgo dividend payments for several years.
Trade Minister Banri Kaieda told reporters the announcement had to be delayed due to disagreement within the ruling party, although there was a certain level of agreement in the cabinet.
Government officials, bankers and Tokyo Electric executives have been wrangling for weeks over who should foot the bill for the crisis at the Fukushima Daiichi plant, which was crippled by the March 11 earthquake and tsunami.
Two months after the disaster, Tokyo Electric is still struggling to get reactors at the plant under control.
The compensation plan had been expected to relieve the worst fears of financial markets and investors are keen to see the details.
"The Tepco issues are largely political. All we can do now is wait until it is finalised," said Toru Hashizume, chief investment officer at Stats Investment Management.
"I'm especially keen to know whether Tepco's liabilities will remain unlimited. Also, I want to know what would be the exact burden for other power companies," Hashizume said.
The plan could come under fire from Kan's critics as a politically driven bailout of the utility.
Tokyo Electric and creditor banks have pushed for hefty state aid, warning that problems at Japan's largest corporate bond issuer -- accounting for 8 percent of the country's 70 trillion yen ($860 billion) corporate bond market -- could destabilise financial markets.
Many politicians and bureaucrats, however, have sought to make shareholders and management accountable for the crisis.
"I think this might be criticised ... from both the left and the right," said professor Koichi Nakano of Tokyo's Sophia University.
"People who are more sympathetic to Tepco and the banks, and worry about the economic repercussions of overburdening Tepco, will be critical of the government for being populist with harsh conditions.
"On the other hand, there are those who are critical of Tepco and the government is perceived as being too lenient on the company and shareholders. It's a controversial issue," he said, but added that the legislation needed for the scheme was likely to be passed by parliament.
Bondholders breathe easier
The government has said it did not plan to put a limit on Tokyo Electric's liabilities, but would ask other nuclear plant operators to help fund the scheme with premiums that could also serve as insurance for future nuclear accidents.
Under the expected arrangement, Tokyo Electric would be placed under close government management oversight for more than a decade to ensure it has sufficient finances to maintain stable power supplies while meeting compensation claims, Kyodo news reported on Thursday.
"Previously, the government wouldn't get involved in similar such schemes, so obviously this is going to have a heavy impact on (Japan's) citizens who will ultimately have to shoulder the burden," said Hiroyuki Fukunaga, chief executive of Investrust, adding that other utilities could also suffer financially, causing problems in energy supply.
"Looking more broadly, this may also lead to further difficulties for Japanese public finances."
Japan already has a public debt equal to about twice its $5 trillion economy.
Chief cabinet secretary Yukio Edano sought to allay such concerns, saying earlier in the day that the scheme did not imply higher electricity charges and that the government would not automatically keep supporting Tepco.
Tepco's main creditor bank Sumitomo Mitsui Banking Corp and other lenders provided 1.9 trillion yen in emergency loans in the immediate aftermath of the disasters, but have said there is little more they can do.
The government has been expected to inject 5 trillion yen worth of special-purpose bonds into the compensation fund.
The bonds can be turned into cash to handle the initial burst of payouts to residents who evacuated the plant's vicinity and others who are due compensation, allowing Tokyo Electric and other utilities to spread their burden over several years.
The special-purpose bonds do not count as issuance to the market and so are unlikely to have much impact on debt prices.
In one government simulation, if compensation totals 5 trillion yen, Tokyo Electric would be asked to pay back 200 billion yen to the fund annually over 13 years, with the rest to be shouldered by the other utilities.
While stock and bond holders in principle would be protected under the scheme, one lawmaker with knowledge of the plan said on Wednesday that it would be a decade before the utility, known for its healthy dividends, paid out again.
Kyodo news agency said the government would ask Tokyo Electric to secure 1 trillion yen in funds through asset sales and streamlining in the first year of the scheme.
Tokyo Electric probably made a net loss of more than 1 trillion yen in the year that ended on March 31, the biggest ever for a non-financial Japanese firm, after booking costs to scrap its four damaged nuclear reactors and writing off tax assets, the Nikkei newspaper reported on Wednesday.