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Japanese Government Plans to Lift Crumbling Tokyo Stock Market - 2003-03-14

Japanese Prime Minister Junichiro Koizumi is taking action to salvage the country's weak stock market, after warning that sliding share prices may cause a "financial crisis."

The Nikkei Average has dropped 80 percent since 1989. It has lost one-fifth of its value in the past month and skidded to 20 year lows in recent days.

That has imperiled the country's banking system, because banks are major shareholders. The country's biggest banks are expected to report a combined loss of $50 billion when the fiscal year ends on March 31.

Under the emergency measures, the government will give banks more time to sell their shareholdings, extending a previous deadline by two-years. It will also make it easier for companies to purchase their own shares. Tokyo has also asked the securities industry to voluntarily ease short-selling, a practice that allows investors to profit when stocks decline.

Economy Minister Heizo Takenaka explains the strategy, saying these measures will not restrict the stock market, but the government wants market operations to be handled correctly and properly.

Japanese officials say the country's central bank, the Bank of Japan, must take steps to support the stock market and boost the economy, after three recessions in the past decade. The government has asked the Bank of Japan to buy more shares from commercial banks trying to unload them. A new central bank governor, Toshihiko Fukui, takes office March 20 and is likely to come under further pressure to help support stocks.

In other business news, Japan's trade with the rest of the world shrank in January for the second straight month, falling nearly 38 percent from the previous year. The current account surplus totaled about $3.7 billion. A major reason for the contraction is surging oil prices amid concerns of a possible war in Iraq. But exports, which drive the economy, remain healthy.

Asia's largest carrier Japan Airlines System will cut 3,600 jobs, 7 percent of its workforce, during the next three-years, mostly through early retirements and hiring freezes. It also reduced its annual profit forecast by two-thirds to $68 million. The airline says a sluggish global economy and a slump in international travel is harming its business.