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Thursday, August 20, 1998 Published at 08:55 GMT 09:55 UK

Business: The Company File

Japan denies bank bail-out rumour

Can the Long-Term Credit Bank hope for a bail-out?

Fresh rumours suggesting the Japanese government will bail-out the Long-Term Credit Bank (LTCB) have been denied by the country's prime minister, Keizo Obuchi.

A report in the Japanese daily financial newspaper, Nihon Keizai Shimbun, said the government and the Bank of Japan will use between ¥500bn ($3.47bn) and ¥1 trillion of public funds to cover LTCB's bad loans and facilitate a merger with Sumitomo Trust & Banking Corporation.

[ image: Prime minister Keizo Obuchi says he is watching the merger talks]
Prime minister Keizo Obuchi says he is watching the merger talks
Some analysts believe that this would be the only move that could save the LTCB from a collapse that would severely test Japan's ailing banking sector.

Key to banking crisis

The fate of the bank, one of the country's biggest and hardest hit with almost $10bn in bad loans, is being seen as a test of the government's will in coming to terms with the banking crisis.

The International Monetary Fund (IMF) and foreign bankers and economists are calling for decisive government action to force banks to tackle the ¥87 trillion ($621bn) mountain of bad loans overhanging the sector.

Mr Obuchi told a parliamentary budget committee there was no truth to the report while a senior Bank of Japan official has also separately denied the rumour.

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