Japan's Parliament approved landmark banking legislation on Monday that will allow the government to nationalize failing banks, and Japan's political parties announced that they had reached a new accord to provide several hundred billion dollars in new money to try to revive the banking system and set the country on a path toward economic health.
The new accord, reached between Japan's governing Liberal Democratic Party and most of the opposition forces, could lead to the injection of huge amounts of public money - more than $400 billion, or four times as much as is now available - into the nation's banks. The Liberal Democrats hope that the political alliance holds long enough for them to win passage in the Parliament for the new accord by Friday, when the current session ends.The possibility of a way out of the financial crisis sent stocks surging on Monday, with shares of the nation's banks jumping an average of 8 percent. The Nikkei index of 225 shares rose 5.24 percent, to 13,555.01, in a big comeback after last week's sudden plunge. U.S. markets also rose on optimism about a solution to Japan's financial problems.
"They are like the wheels on both sides of a car," Prime Minister Keizo Obuchi said at a news conference, referring to the two pieces of legislation. "When both of them pass the Parliament, it will mean that we can send out a clear and strong message to the world that a global depression will absolutely not begin in Japan."