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Tuesday, 19 February, 2002, 09:30 GMT
Reform fears hit Tokyo markets
President George W Bush speaking at a joint press conference with prime minister Koizumi
President Bush's visit focused on the need for economic reform
Two Japanese economy ministers have dashed hopes of an injection of public money into Japan's ailing banking system.

Their remarks sent shares tumbling in Tokyo and the yen hit its weakest level against the dollar in a week.

Meanwhile, Japan's top three brokerages have suffered a downgrade from a major credit ratings agency because of poor stock market prospects in the midst of the Japanese recession.

Ahead of US President George W Bush's visit to Japan, investors had been hopeful the government might announce steps to help the debt-burdened banks and share prices rose in Tokyo.

Talk of reform

The need for economic reforms and the weakness of the Japanese yen dominated talks between the US president and Japan's Prime Minister Junichiro Koizumi in Tokyo.

But as Mr Bush prepared to leave on the next leg of his Asian tour, Finance Minister Masajuro Shiokawa made clear there were no immediate plans for a bank bailout.

Tokyo's benchmark Nikkei index took its biggest one-day fall in two months.

The Nikkei closed down 2.4% at 9,847.16, while the yen suffered its biggest decline for a week, falling as low as 133.5 to the dollar.

"I don't think it's necessary to inject public funds into banks now," the finance minister said after the weekly Cabinet meeting.

Ministerial action

Last Friday, Mr Shiokawa had described recapitalising the banks as a "natural" policy choice.

Fiscal Policy Minister Heizo Takenaka also played down the likelihood of rapid action.

He said that any injection of taxpayer's money into the banks would have to wait until after the results of a interim inspection of the banks in March.

Moody's Investors Service cut its ratings on downgraded its outlook on Nomura, the country's biggest broker, and on second and third ranked Daiwa Securities and Nikko Cordial.

It said brokerages were vulnerable "given the current Japanese and capital markets" which were characterised by "slow retail funds flows into capital market product and weak local corporate bond and equity markets".

See also:

18 Feb 02 | Business
Bush gaffe hits yen
15 Feb 02 | Business
Yen woes may dominate Bush trip
24 Jan 02 | Business
Japan suffers export slump
22 Jan 02 | Business
US comments depress yen
10 Jan 02 | Business
Japan says yen's fall 'too rapid'
09 Jan 02 | Business
Japan pins hopes on weak yen
26 Nov 01 | Business
Bad loans mount at Japan's banks
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