Tornado Alley (PROG)

[StephanieVanbryce]

FREE-MARKET FAILURES ..Tepco Qualifies

.......just one more bailout to a private corporation ..

TOKYO—The chairman of the Japanese Bankers Association said that Tokyo Electric Power Co. shouldn't be nationalized but that the government should support it however necessary, and added that the banking industry also will continue to assist the embattled utility.

"We need to secure a stable power supply for our country," Masayuki Oku, the chief of Japan's most influential banking group, said Monday, adding that the government is legally responsible for keeping Tepco on a sound footing.

Mr. Oku cited a law stipulating the government must support power companies during unprecedented crises. He said the area for which Tepco supplies power accounts for about 40% of total gross domestic product and needs to be protected as the country's infrastructure.

"We will give financial support to the company" on the understanding that the government will support Tepco, Mr. Oku said.

Japan's leading banks and trust banks already have provided close to ¥2 trillion ($23.78 billion) in loans to Tepco since the earthquake hit on March 11. The core banking units of Sumitomo Mitsui Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. provided about ¥600 billion, ¥300 billion and ¥500 billion, respectively, in loans. The Development Bank of Japan also is preparing to provide about ¥100 billion in financing to the power supplier this month, according to people familiar with the matter.

Mr. Oku, who is also chairman of SMFG, said the government and the private sector have to cooperate to reconstruct the nation, and said imprudent remarks among politicians over Tepco's nationalization should be avoided.

Over the past week, speculation has grown that the government is considering nationalizing Tepco and the media quoted some politicians as saying it could be a possibility. Prime Minister Naoto Kan, however, shot down the idea of a complete government takeover.

"It is necessary to provide aid [to Tepco] but basically we want it to remain as a private company," the prime minister said on Friday.

Mr. Oku added that, "without sharing some burdens, there wouldn't be reconstruction for the nation," and said such burdens may include an increase in power fees or disaster tax. He said the disaster has spread too far beyond the banking industry to measure its impact on the economy.

"We have to draw a big picture on how we tap such funds [for the repairs and reconstruction]," he said, adding that the government will likely have to issue Japanese government bonds or relief bonds.

From the banking side, there are household assets valued at ¥1,400 trillion in Japan, Mr. Oku said, and shifting it into such investment could be an option as long as it won't lead to a liquidity crisis.

He said loan demand is yet to pick up as companies aren't ready for capital spending or repairs. He also said big companies can still issue bonds despite the high price, unlike during the period after the collapse of Lehman Brothers when companies struggled to raise funds.

http://online.wsj.com/article/SB10001424052748703806304576242540243640736.html?mod=googlenews_wsj