Japan may need scheme to inject funds into ailing firms, says LDP lawmaker

Japan's government and the central bank may need to set up a special purpose vehicle to inject capital into companies hit by the coronavirus pandemic, an influential ruling party lawmaker told Reuters on Friday.

Yoichi Miyazawa, an upper house lawmaker of the ruling Liberal Democratic Party, said the pandemic if prolonged could impair the capital of key Japanese industries and companies that play a key role in regional economies. "It will be difficult to achieve an early economic recovery unless we consider capital injections into companies when the coronavirus pandemic subsides and the economy gets off to a new start," he said in a phone interview.M

One idea would be to create a scheme where the government joins hands with the Bank of Japan to acquire preferred stocks of the company in need of help, he said. Shareholders of preferred stock receive dividends and their claims rank above those of common stockholders, which is attractive to investors seeking stability in future cash flows. Miyazawa said he has presented his proposals to Fumio Kishida, who oversees the party's policy drafting and is close to Prime Minister Shinzo Abe.

With Japan's tally of coronavirus cases at more than 12,500 and deaths at around 330 as of Friday, the pandemic threatens to trigger bankruptcies and layoffs and push the world's third-largest economy into a deeper recession.