Japan may consider being part of Greece bailout plan

Japanese shares have been hit hard by the debt crisis in European economies

27 September 2011 Last updated at 04:53

Japan has said that it would consider being part of a global plan to help bailout Greece.

Finance Minister Jun Azumi said eurozone countries needed to come up with a rational plan to ease global concerns.

Mr 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 slow global growth.

However, on Tuesday, the Nikkei rose, giving further proof of volatility.

“If there is a scheme that is 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,” Mr Azumi was quoted as saying by the Reuters news agency.

The finance ministry confirmed those comments to the BBC.

Multiple factors

Analysts said Japan’s willingness to consider sharing some of Greece’s bailout burden stemmed from the fact that it wanted to ensure stability in the region.

Europe is a key market for Japanese exports and there are concerns that if a solution to the debt crisis is not found soon, it may hurt growth and dent demand for Japanese goods.

“If the financial turmoil spread from Europe to the rest of the world, Japan will not be immune,” Masaaki Kanno of JP Morgan told the BBC.

Growing uncertainty in Europe may also see investors flock to traditional safe havens such as the yen.

That may result in the Japanese currency strengthening even further against the US dollar and the euro.

A strong currency not only makes Japanese goods more expensive, but also hurts the profits of companies when they repatriate their foreign earnings back home.

At the same time, the crisis has resulted in sharp falls at the Tokyo Stock Exchange.

Mr Kanno added that if the falls continued, it could be detrimental for the Japan’s economy.

“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.”

Eurozone governments are in talks to discuss how best to stop the crisis spreading from Greece to the rest of the continent.

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