TOKYO (AP) — Prime Minister Yoshiro Mori instructed Cabinet members to set up a task force to consider ways to boost the economy, and set its first meeting date, his spokesman said.
The task force, which was to hold its first meeting Thursday, will discuss ways to reinvigorate the stock market and promote write-offs of bad loans, Kazuhiko Koshikawa, deputy press secretary to the prime minister, said Wednesday.
Tokyo's stock market has been falling fast. On Tuesday, the benchmark 225-issue Nikkei Stock Average plunged to a 16-year-low of 11,819.70. On Wednesday the Nikkei edged up to close at 11,843.59.
In foreign money markets, the dollar surged against the yen to hit a new 20-month high at 121.20 in afternoon trading in New York.
Currency traders heavily sold their yen to buy dollars Wednesday, on growing concerns over the future of the Japanese economy and rumors that the Bank of Japan would go back to the zero interest rate policy in coming days.
On Wednesday, the U.S. currency finished the New York session at 121.11 yen, its highest close since July 13, 1999 when it was quoted at 121.32 yen.
On Wall Street, the prospect of economic slowdown spreading around the globe sent the Dow Jones industrials below 10,000. According to preliminary calculations, the Dow fell 317 to 9,973, recovering some ground after an earlier, 395-point slide.
The newest fear on Wall Street is that Japan's economic problems will cut into demand in that country for U.S. goods and services — leading to a further drop in American stock prices.
Thursday's meeting in Tokyo was to be headed by Mori and attended by cabinet members including Finance Minister Kiichi Miyazawa and Financial Services Minister Hakuo Yanagisawa, as well as leaders of the three-party ruling coalition.
Koshikawa said that the discussions will be based on the economic stimulus package submitted by the coalition last week, in which they recommended addressing the bad loan problem at banks and revitalize businesses.
Much of Japan's bad loan problem is related to the decreased value of land offered as collateral during the bubble economy of the 1980s.
Although billions of dollars of taxpayer money have been funneled to help resolve the bad loans racked up by banks, problem loans still total a staggering 64 trillion yen (dlrs 531 billion).
On the stock market, the Nikkei edged up for the first time in five sessions, boosted by gains in technology heavyweights Nippon Telegraph and Telephone Corp., Canon Inc. and Fanuc Ltd. in the wake of the rise in U.S. stocks on Tuesday.
But the broader Tokyo Stock Price Index slipped, and the Nikkei's uptick only marginally offset the huge losses on Tuesday that left it at a new 16-year low.