Tumbling share prices of Japanese stocks are eroding the capital of Japanese banks thereby suffocating the banks' ability to lend money to broke businesses. So, the Japanese government is looking into possible solutions.
Kaoru Yosano, the powerful three-pronged finance minister, financial services minister and economics minister, has instructed his staff to look into measures to counter falling stock prices—including an idea floated by the chairman of the influential Keidanren business lobby, Fujio Mitara, who says the government should set up a public body to buy shares in the market, according to the Financial Times.
Whoa! “If it is possible to support stock prices using public funds, we can expect a strengthening of the financial health of financial institutions and an increase in lending,” Mitara told the Financial Times. Is it me or does this sound scary?
As the United States looks to foreign models to help navigate its domestic stock slide, projects like this one set a dangerous precedent. A government that manipulates stock prices very much takes the free out of the free market. We should all be keeping a close watch on the levels of intervention happening globally and ensure that no reckless experiments become part of a global economic plan.