Bank bailout bill clears Lower House

A bill to inject public funds into financial institutions to bolster their capital bases was passed by the House of Representatives at its plenary session Thursday.

The so-called bank recapitalization bill cleared the Lower House by a majority vote of the Liberal Democratic Party and its ruling coalition partner, New Komeito.

House of Councilors deliberations over the bill to amend the Act on Special Measures for Strengthening Financial Functions are expected to begin Friday, after it is sent to the Upper House.

The amendment is being proposed as an emergency measure in response to the global financial turmoil, which, it is feared, could erode the capital bases of financial institutions around the world.

The bill would allow the government to accept applications for public funds from financial institutions until the end of March 2012, instead of last March as stipulated in the present act.

The bill has been modified to include a provision that seeks management responsibility if the company's financial standing deteriorates for reasons other than the current financial crisis, after a request from the Democratic Party of Japan, the main opposition force.

The bill also requires disclosure of farm cooperatives, which have received taxpayer money via Norinchukin Bank, the de facto central bank for agriculture, forestry and fishery cooperatives.

A supplementary resolution adopted by a Lower House panel Wednesday would require a report to the Diet after public funds are injected into Norinchukin Bank. The DPJ had demanded advance approval from the Diet, a step the ruling bloc rejected.

The DPJ is expected to seek more amendments to the bill, including prior Diet approval for tax money for the farm bank, in deliberations in the Upper House, dominated by the DPJ-led opposition camp, before it is sent back to the Lower House.

But in such a case, the ruling coalition, which holds a two-thirds majority in the more powerful House of Representatives, intends to enact the version that was passed by the Lower House in a revote.