JAPAN EXPECTED TO CUT BASE RATE FOR STATE BODIES
Japan is expected to cut the base lending
rate for state financial institutions to 5.5 pct from 6.2 as
part of the recent pact by major industrial nations in Paris,
Finance Ministry sources said.
    They said the cut is based on a revision of the Trust Fund
Bureau Law, which should be approved by parliament on March 3,
abolishing the 6.05 pct minimum interest rate on deposits with
the bureau.
    The bureau channels funds to government financial
institutions for public works and other official uses, they
said.
    The base lending rate for state bodies such as the Japan
Development Bank, People's Finance Corp and the finance
corporations of local public enterprises usually moves in
tandem with long-term prime rates, the sources said.
    However, it was impossible for them to follow the last cut,
to 5.8 pct from 6.2 pct on January 28, because the Trust Fund
Bureau rate was legally set at 6.05 pct.
    The ministry will abolish the minimum rate and introduce a
market-related one to resolve the problem and stimulate the
domestic economy, they said.
    On Tuesday, the ministry allowed long-term bankers to cut
their prime to a record low of 5.5 pct, effective February 28.
The move suggested it had reached agreement with depositors
using the bureau, the postal savings system of the Posts and
Telecommunications Ministry and the Japan welfare annuity of
the Ministry of Health and Welfare, the sources said.
    These ministries are trying to determine which market rates
should be considered when setting the bureau's deposit rate,
the ministry sources said.
    Coupon rates on new 10-year government bonds, minus 0.1
percentage points, is the likeliest choice, they added.
 REUTER
