Tokyo to buy Europe bonds to ease debt problems

PanARMENIAN.Net - Japan's new finance minister said that Tokyo would buy bonds issued by Europe's permanent bailout fund to help soothe the eurozone's debt problems and stabilize the under-pressure yen, AFP reported.

Taro Aso told reporters the new government would tap foreign exchange reserves to pay for the bonds, but declined to say how much it planned to buy.

A finance ministry official said the bond buying could start as early as Tuesday, Jan 8 when the European Stability Mechanism (ESM) begins selling the paper, adding that Japan "will make a purchasing decision after seeing the terms of the issuance".

Japan, which counts Europe as a major export market, previously bought billions of dollars in bonds issued by the ESM's predecessor, the European Financial Stability Facility.

"Stabilizing Europe's financial crisis will eventually contribute to the stability of currency (prices) including the yen, and so we plan to keep purchasing ESM bonds using foreign reserves," Aso said Tuesday.

Japan has suffered as demand dropped off on the debt-hit continent and reports Tuesday said Tokyo was mulling an extra budget worth about 13.1 trillion yen ($150 billion) to boost the world's third-largest economy.

About 40 percent of that figure would be earmarked for public works projects, they said, as post-Fukushima Japan struggles to cement a recovery.

The Liberal Democratic Party government, which swept to power last month, was also eyeing a stimulus package worth at least 20 trillion yen aimed at creating more domestic demand and new jobs, the Nikkei business daily reported.