The Japanese government is edging closer to using taxpayers' money to rescue some of the nation's debt-burdened banks.
Bank stocks slumped in 2001, with shares in the biggest banks ending as much as 70 per cent below their highs. But the shares have perked up as talk of government aid has grown louder and spreads between the yields of bank bonds and government bonds have narrowed.
The Japanese government has pumped in over nine trillion yen ($68.76 billion) to support the banks since March 1999, to no great effect, analysts say.
The banks have been hit hard by losses on their vast stockholdings - the Tokyo stock market shed 24 per cent in 2001 - and the cost of disposing of problem loans of some $152.8 billion at the top banks at end-September.
Japan will end the full government guarantee on bank deposits from April. A string of failures over the past few months in credit unions and shinkinbanks that serve local communities is seen as a prelude to other weaker financial institutions going under as depositors become more sensitive to credit risks.
Japan is stepping up its inspection of the banks and the result will be more corporate borrowers pushed into restructuring before books are closed for the end of the business year, adding to the pressure on the banks.
In exchange for public funds in 1999, banks submitted restructuring plans to the Financial Services Agency, Japan's top financial watchdog, and promised that money would be returned to government coffers.