Japan May Come to Greece’s Rescue By Buying More EFSF Bonds

The Japanese government is willing to buy more rescue bonds from the European Financial Security Facility (EFSF) to aid Greece’s recovery, as long as the European community comes up with a rational plan to stabilise international markets, said Japanese Finance Minister Jun Azumi on Tuesday.

Azumi told reporters in Tokyo that Japan was dedicated to contributing to any global bailout, though he warned eurozone members that a workable plan was needed in order to alleviate the current global fears.

The Japanese government is willing to buy more rescue bonds from the European Financial Security Facility (EFSF) to aid Greece’s recovery, as long as the European community comes up with a rational plan to stabilise international markets, said Japanese Finance Minister Jun Azumi on Tuesday.

Azumi told reporters in Tokyo that Japan was dedicated to contributing to any global bailout, though he warned eurozone members that a workable plan was needed in order to alleviate the current global fears.

[quote]”If there is a scheme that’s based on a firm process, involves a reasonable amount of money and could provide the world and markets with a sense of security regarding a Greek bailout, I would not rule out the possibility of Japan sharing some of the burden,” said Azumi as quoted by Reuters.[/quote]

The Japanese government has bought a total of 2.68 billion euros (US$3.8 billion) of EFSF bonds during January and June of this year, which saw them reach a 20 percent share of all bonds issued. Japan is eager to ensure economic stability in the region, due to its close economic ties with the continent.

[quote]”If the financial turmoil spread from Europe to the rest of the world, Japan will not be immune,” said Masaaki Kanno, the chief economist at JPMorgan Chase & Co. in Tokyo, to the BBC. “Japanese banks and insurance companies are big investors in stock markets and if the Nikkei continues to plunge, it will send the domestic financial system in turmoil.”[/quote]

Azumi’s comments come a day after the Nikkei 225 index fell to a two-and-a-half year low amid fears that the debt crisis may hamper the global recovery.

The economic uncertainty in Europe may also see investors moving their money to the more traditional safe havens such as the yen. While this would only see the yen grow stronger, it would also mean that Japanese exports become more expensive, hurting the profits of companies back in Japan.

“We will keep a close eye on the exchange market,” stressed Azumi, noting that a disproportionate rise in the yen “may interfere with the strong recovery of the economy” following the March tsunami and earthquake disasters.

“We will act quickly if there is anything we can do. We will pursue other measures,” said Japanese Economic and Fiscal Policy Minister Motohisa Furukawa in a separate interview on Tuesday.