Japan To Buy Eurozone Debt To Help Europe Tackle Debt-Crisis - Wall Street Journal

(Adds comments from Japan's finance minister, Japanese government officials, background.)

      By Takashi Nakamichi     Of DOW JONES NEWSWIRES    

TOKYO (Dow Jones)--Japan on Tuesday said it plans to buy debt to be issued by the European Financial Stability Facility later this month in a bid to help prevent the European debt crisis from growing further.

"The euro zone is planning to issue a large amount of bonds in a cooperative manner late this month to raise funds to assist Ireland, and it is appropriate for Japan, as a major economy, to buy some of the EFSF bonds to bolster confidence" in Europe's efforts, Finance Minister Yoshihiko Noda said at a news conference.

"We're thinking about buying more than 20% of the amount" of EFSF securities to be issued in the initial round, he said.

The EFSF in 2011 plans to raise up to EUR16.5 billion and in 2012 up to EUR10 billion. It intends to launch three benchmark bonds next year with each transaction involving EUR3 billion to EUR5 billion. The plan is subject to revision, and Japanese government officials told Dow Jones Newswires that they were mindful of recent media reports that the amount of the initial round of issuance this month could be EUR8 billion.

But the move may not have a direct impact on the euro's exchange rates, as Noda indicated that the Japanese government will use some of the euros held in its foreign reserves for the purchases.

"We'd like to do this within the realm of euro liquidity in the foreign currency reserves," Noda said.

If this month's bond sales come to around EUR3 billion to EUR8 billion, "we'll be able to easily handle this using (euros in) the foreign reserves," one of the government officials said.

The Japanese move reflects the government's concern over the potential damage that could be inflicted on the nation's export-reliant economy if European economies deteriorate because of the debt turmoil.

The official added that Japan has yet to decide whether to buy EFSF securities in the subsequent rounds of EFSF issuance.

Japan's foreign-currency stockpile stood at $1.096 trillion last month---the world's second largest reserve after China's. While most of the reserves are believed to be held in U.S. Treasurys, Japan, like many other nations, has kept under wraps the currency composition of the reserves.

-By Takashi Nakamichi, Dow Jones Newswires; 813-6269-2782; takashi.nakamichi@dowjones.com

-Takashi Mochizuki contributed to this article.

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