Statement by the Governor concerning the temporary nationalization of the Long-Term Credit Bank of Japan

October 23, 1998
Bank of Japan

1. We have today been informed by the Long-Term Credit Bank of Japan that the Prime Minister has decided to temporarily nationalize the bank pursuant to the "Law for Emergency Measures to Revitalize Financial Functions". We have also been informed of this fact by the Government.

2. Following this decision, in accordance with the "Law for Emergency Measures to Revitalize Financial Functions", the Deposit Insurance Corporation will temporarily acquire all shares of the Long-Term Credit Bank of Japan and provide necessary support including the extension of loans, the purchase of assets, and the extension of grants to cover losses. Funding measures for the Deposit Insurance Corporation necessary for such financial support have also been ensured.

3. Through these measures, the Long-Term Credit Bank of Japan will continue operations as a "temporarily nationalized bank". Thus, all of the bank's obligations, including deposits, debentures, interbank borrowings, and derivative transactions, will be performed smoothly.

4. The Bank of Japan strongly expects that restructuring measures with respect to the Long-Term Credit Bank of Japan will be promptly implemented while it is nationalized.

Besides the measures for financial revitalization, a framework has been established to strengthen the capital base of banks using public funds in order to promptly restore soundness of the financial system. The Bank of Japan expects that these measures will be utilized appropriately. Meanwhile, we will continue to take the utmost efforts, in cooperation with the Government, to ensure the stability of the Japanese financial system.