Bank of Japan may buyout banks shares

As falling stock prices are now seemingly the norm across the world, market risk for financial institutions are especially high.

As a result of this increased risk, the Bank of Japan is considering buying shares in Japanese companies that are now currently owned by commercial banks, amid fears that the stock market will break through the 26-year low barrier as the Nikkei 225 Stock Average fell by 6.4 percent, the lowest since 1982.

In order to restore confidence in the financial system, a joint collaboration between the Japanese government and central bank saw 4 trillion yens worth of stocks being protected in order to safeguard falling values.

The possibility of any further rate cuts are highly unlikely as the country’s interest rate of 0.5 percent is actually the lowest in the industrialised world so there is little room for manoeuvre, especially given the risks to inflation.

With corporate profits down and business and consumer confidence at an all time low, the Bank of Japan has said in a recent statement that careful consideration will be taken prior to any policy changes due to the fragility of the currency market.

As the yen is currently trading at a 13-year high against the dollar, the G7 group of nations have expressed their concern.

It has to be said that Japanese banks are known for their prudence, although the $9 billion purchase made by Mitsubishi UFJ Financial Group for a fifth of Morgan Stanley is a huge purchase, resulting in the bank having raise over $10 billion by selling news shares.

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