Hiroshi Mitsuzuka, the minister of finance, and Yasuo Matsushita, the governor of the Bank of Japan (BoJ), repeated their promise to protect depositors after the small Tokyo City Bank became the third Japanese financial institution to collapse in less than a fortnight.
"We strongly urge the public not to pay heed to irresponsible rumours and to act calmly," their joint statement said. "The stance of the Ministry of Finance (MoF) and the BoJ is that we will provide funds smoothly and without hesitation so that repayment of financial firms' deposits and other payments will not be hindered."
The demise of Tokyo City Bank, a small regional bank based in the northern city of Sendai, follows the collapse last Monday of the 10th-ranked Hokkaido Takushoku Bank and, three days ago, of the brokerage Yamaichi Securities. But the news had little effect yesterday on the stock market, which rose 3 per cent at one point to close up 178 points, or 1 per cent at 16,045.
Investors seem to be increasingly confident that the government will eventually use public funds to stabilise the financial system by providing loans to weakened banks which still have relatively sound business. Japanese finance houses are suffering a credit squeeze, caused by eroded confidence among foreign lenders.
Yesterday the credit rating agency Moody's Investors Service said it was contemplating downgrading the Long-Term Credit Bank of Japan, Nippon Credit Bank, and the three trust banks, Mitsui Trust, Yasuda Trust, and Chuo Trust.
Ominous rumours circulated about other firms, and several shares in the financial sector were down sharply. Among the brokerages, Nikko Securities' shares went down, as did the smaller Taiheiyo Securities.
Daiwa Securities, Japan's second largest, held a press conference to deny market rumours that it had concealed off-the-books losses, a ploy which contributed to the demise on Monday of its competitor, Yamaichi.
The president of Nippon Credit Trust told journalists in New York that, contrary to rumours, his parent company, Nippon Credit Bank, had shown "marvellous" results.
The biggest institution to be the subject of rumours is Fuji Bank, the main creditor of Yamaichi Securities which, like the entire financial sector, is labouring under the burden of bad loans left over from the 1980s "bubble" economy.