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Gov't hints at public-fund reserve under deposit refund policy.

TOKYO, July 31 Kyodo

The government will consider reserving public funds to protect deposits for settlement purposes at failed banks if necessary to secure stability in the financial system, the top government spokesman indicated Wednesday.

Speaking at a press conference, Chief Cabinet Secretary Yasuo Fukuda said Prime Minister Junichiro Koizumi's administration will submit bills necessary to ensure the stability of financial institutions' settlements to the next parliamentary session in the fall.

Fukuda also indicated the measure may be temporary, and that the government may review it in the future depending on economic conditions.

Fukuda's remarks came after Koizumi reportedly told Financial Services Minister Hakuo Yanagisawa on Tuesday to come up with a measure to guarantee the full refund of deposits for financial settlements in the wake of bank failures from April 1, 2003.

Koizumi has said his administration will impose a 10 million yen refund limit per person per bank on ordinary and checking-account bank deposits from next April. The blanket refund policy for time deposits was abolished April 1.

But various circles were questioning the policy of imposing the refund limit on all deposits, claiming it could accelerate an exodus of deposits from midsize and smaller banks to larger ones and threaten the nation's financial stability.
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Publication:Japan Policy & Politics
Date:Aug 5, 2002
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