It was Mr Hashimoto's third change of mind in three days, but it was enough to spark a rally of 466 points or nearly 3 per cent on the Nikkei average of 225 leading shares ,which closed at 16,308. It reinforced the extent to which the Japanese government is effectively a hostage of the markets, which have fluctuated wildly since the demise of Japan's 10th biggest bank, Hokkaido Takushoku, on Monday.
Several other banks are believed to be close to insolvency, a result of bad loans left over from the boom days of the country's bubble economy, with problems brought to a head by plunging credit ratings for Japanese financial institutions on the world markets. The markets and business are looking for a clear signal from Mr Hashimoto that public money will be made available to cushion the effects of any further collapses.
On Monday and Tuesday, when it appeared that they would, the Nikkei showed its appreciation with a two-day rise of more than 10 per cent. On Wednesday, Mr Hashimoto said that he had been misinterpreted; the markets thrashed him with 5 per cent fall. Yesterday, spokesmen for the Prime Minister let it be known that he had changed his mind, and he was duly rewarded with a 3 per cent pat on the head.
The financial crisis in Japan comes at a critical time, coinciding as it does with worldwide market uncertainty, acute anxieties among Japanese banks, and a moment of political vulnerability for Mr Hashimoto.
Many of Japan's banks release their results this week, and their balance sheets have fuelled speculation about the victims most likely to follow Hokkaido Takushoku. The shares of most major banks, including Sumitomo and Tokyo-Mitsubishi, rose yesterday, but smaller institutions continued to look vulnerable. Among the most actively traded stocks were Ashikaga, a regional bank, which fell 7 points to 140 after a sharp decline the day before. Fuji Bank, a big player which yesterday fell 44 points to 769, is under especially intense pressure, having committed itself to supporting the floundering brokerage, Yamaichi Securities.
Mr Hashimoto's change of position yesterday was couched in the most deniable terms possible, leaving room for yet another about turn should political conditions render it necessary.
Credit - or blame - for the idea has been carefully placed with Kiichi Miyazawa, a former prime minister, who met Mr Hashimoto yesterday morning. Aides later conveyed the news to journalists indirectly.
The issue is an agonising one for the government, which faces political turmoil and accusations of betrayal whatever it chooses. On the one hand, Mr Hashimoto is committed to reform and modernisation of the economy and the creation of an environment where inefficient institutions will not be protected from competition by an endlessly indulgent government.
On top of this, with a mountainous deficit, there is no ready cash to give away. When the government spent billions of yen of taxpayers' money early last year bailing out a group of bankrupt housing loan companies, there were street demonstrations and uproar in parliament.
But a failure to inject public money raises the prospect of a continuing stock market slide, generating in its turn more bankruptcies.
The markets and business have made it clear that they want government money to help the banks get rid of their non-performing loans and, ideally, tax cuts and public works spending. If Mr Hashimoto grants these, he will provoke the fury of ordinary taxpayers, and seriously undermine his credentials as a committed reformer. If he doesn't, then the markets will continue to slide.Reuse content