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BOJ members cast doubt on stock purchase plan: minutes.

TOKYO, Nov. 19 Kyodo

The Bank of Japan's (BOJ) plan to buy shares directly from commercial banks met skeptical responses from many members of the central bank's Policy Board during its Sept. 17-18 meeting, according to minutes released Tuesday at the request of Kyodo News.

At the outset of the two-day meeting, BOJ Governor Masaru Hayami called on other central bank policymakers to consider the plan as a step to clean up the bad-loan mess tormenting the nation's banking sector.

''A central bank does not buy shares under normal circumstances,'' Hayami was quoted as saying by the minutes. He added, however, that the proposed policy is expected to set the stage for moving the whole financial system including the disposal of bad loans.

But Shin Nakahara cast doubt on the effectiveness of the plan, saying that commercial banks have ''no incentive'' to sell shareholdings.

Toshikatsu Fukuma said that while the BOJ's share purchase is the ''last resort,'' the current situation does not require it, according to the minutes. ''Banks want to keep shares if they incur losses'' by selling them, he said.

An official from the BOJ's executive office which worked out the share purchase plan told the nine-member board that the scheme will provide an additional policy option for banks even if they do not intend to sell shareholdings.

Kazuo Ueda, a member of the board, said the planned purchase of shares worth 1 trillion to 2 trillion yen is not large enough to help banks step up the disposal of bad loans.

On the second day of the meeting, the board unanimously decided to announce the plan as skeptical members accepted it on the grounds that the details of the scheme would be worked out later.

Kyodo News asked the BOJ to release the minutes under the information disclosure law for independent administrative entities which took effect in October. The central bank complied with it while withdrawing information whose disclosure is considered to hamper the bank's smooth policy implementation.

On Monday, the BOJ said it will begin purchases of shares on Nov. 29 from banks whose shareholdings exceed their core capital.
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Publication:Japan Weekly Monitor
Date:Nov 25, 2002
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