U.S. bank bailout 'insufficient,' Japan leader says

TOKYO -- Japanese Prime Minister Taro Aso said Thursday the U.S. bank bailout was insufficient to quell investors' fears and the lack of confidence is contributing to the renewed plunge in global stock markets.

"Since it was insufficient, the market is again falling sharply," Aso told lawmakers at the upper house budget committee in parliament. "My understanding is that it was the voice of markets."

The budget committee was wrapping up talks on a supplementary budget aimed to help struggling small- and midsized firms amid an economic downturn.

Aso made his comments as Japan's key stock index plummeted nearly 10% in early trading Thursday morning following another dive on Wall Street amid growing global recession fears. The index later closed down 1,089.02 points, or 11.41%, to close at 8,458.45 on Thursday, marking the biggest one-day percentage drop since the market crash of October 1987.

The U.S. Congress earlier this month approved a plan to use US$700 billion of public money to buy bad mortgage-related securities and loans from troubled financial institutions. Some US$250 billion of that will be used to buy shares in leading U.S. banks.

Aso said that the continued market volatility suggests that more action is needed. He did not elaborate.

Analysts brushed off Aso's comment, saying his view was shared by many investors and had been already factored in.

"He only said what any investor already knows," said Kazuki Miyazawa, market analyst at Daiwa Securities SMBC. "An injection of public money does not immediately relieve banks' lending reluctance, and many of us agree that further steps are needed to improve the market conditions."

Shinichi Ichikawa, chief strategist at Credit Suisse, said Aso's comment caused little damage to the market.

"The biggest reason for (Thursday's) decline is the market fear about the U.S. economy. Investors thought they just climbed down a mountain and found another one in front of them," he said, referring to a brief rebound in stock prices in reaction to measures taken after the G-7 and renewed concerns about additional steps.