Monday, Dec. 31, 2012

LDP may use taxes to prop up giants

Electronics firms would get cash injection by selling factories and leasing them back, inviting moral hazard

Jiji

The Liberal Democratic Party-led government is considering using taxpayer funds to purchase factories and other facilities from struggling electronics makers, materials producers and other manufacturers boost their competitiveness, it was learned Monday.

The step is intended to help increase the funds these companies can use to build new facilities and equipment, beef up research and development, and promote new business areas showing growth potential, sources said.

The government also hopes the plan will help them maintain jobs and prevent the hollowing-out of Japanese industries, the sources said.

A new economic revival headquarters set up by the administration of Prime Minister Shinzo Abe, which was inaugurated last week, will discuss the details of the program, the sources said.

Under a draft of the program, a special purpose company to be established jointly by entities including the government-affiliated Development Bank of Japan and private-sector leasing firms, will buy up factories and other facilities with public funds, the sources said.

Companies that sell their facilities to the SPC will continue to use the assets by leasing them, while utilizing the proceeds from the sales to make new investments, the sources said.

The government is mulling buying ¥1 trillion worth of such facilities over some five years.

But supporting private-sector companies with public funds may create a moral hazard, analysts said. If the market value of the assets bought by the SPC sinks and causes losses, more taxpayer money may be needed to cover the losses, they warned.

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The Japan Times

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