TOKYO (AFP) — Japan said on Tuesday that it is ready to inject money into struggling banks after France announced a major cash boost for debt-laden institutions, adding to guarded optimism over international efforts to counter the financial crisis.
European and Asian shares rose amid hopes that the credit freeze may be stabilizing and a new US package could kickstart the world's biggest economy.
Japan, the second biggest economy, is ready to put public funds into banks that fall victim to the credit crunch, Economy Minister Kaoru Yosano said.
"The government will inject capital so that financing for small and mid-sized companies does not deteriorate," Yosano told reporters. "I see no reason to draw a line between big and regional banks."
French bank shares rose on Tuesday after the government announced it will inject 10.5 billion euros (14 billion dollars) into the country's six biggest banks.
The biggest bank Credit Agricole will get three billion euros, BNP Paribas will get 2.55 billion and Societe Generale 1.7 billion, Finance Minister Christine Lagarde said.
Bank of France governor Christian Noyer insisted that French banks were not short of capital. "The aim of the operation is not to recapitalise the banks... but to support the financing of the economy," he said.
The world financial system was brought to the verge of collapse by widespread panic over bank exposure to bad housing loans in the United States which brought lending between banks to a near halt.
The European Central Bank said it would pump roughly 400 billion euros (530 billion dollars) into eurozone money markets in coming days to get cash flowing. ECB chief economist Juergen Stark said interbank money markets are improving, but warned there was still a "serious risk" of more banking sector "accidents."
"We see a slight improvement, a slight easing on the interbank market, but not yet a breakthrough," Stark told German radio.
And signs of the crisis remain everywhere.
Iceland's biggest bank Kaupthing, which was nationalised at the height of the finance turmoil, has failed to pay interest to "samurai" bondholders in Japan, a bank alleged.
Kaupthing was supposed to pay interest Monday on a 50-billion-yen (493 million dollar) issue of a three-year samurai bonds launched in October 2006.
"But there was no money transfer from Kaupthing Bank by the end of the scheduled payment day," said a spokeswoman for Sumitomo Mitsui Banking Corp., which makes payments to bondholders for the Icelandic bank.
If Kaupthing fails to complete the payment within one-week, it will be in default on its debt obligations, she said.
Kaupthing's chief communications officer, Jonas Siguregeirsson, told AFP a committee was looking into the sale of assets and that a proportion would be paid to the bondholders.
World oil prices dipped back toward 70 dollars a barrel on profit-taking, after recent gains made in the expectation that OPEC will order an output cut this week.
But world stock markets rose again, comforted by the encouraging signs that the worst of the turmoil is over. Paris stocks put on 2.24 percent, London 0.93 percent and Frankfurt 0.92 percent.
In Asia, Tokyo jumped 3.34 percent as Sydney gained 3.9 percent. But Hong Kong stocks closed down 1.80 percent, Shanghai lost 0.78 percent and Singapore shed 0.95 percent.
"Volatility does not seem to be reducing at all," said Capital Spreads managing director Simon Denham in London. "In truth there is very little information to play with just at the moment, with virtually no corporate announcements and economic data either."
French President Nicolas Sarkozy proposed a new meeting of EU leaders to prepare for a global summit next month on reforming the international financial system.
Europe should bring to the meetings "the idea of a rebuilding of world capitalism," he said at the European parliament.
Sarkozy, who also proposed an "economic government" to work alongside the European Central bank for euro countries, said the global summits should bring together the Group of Eight industrialised powers with the five biggest emerging economies, led by China and India.
He said he would discuss China and India's role in the rebuilding of the world economy at an EU-Asia summit in Beijing on Friday and Saturday.
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