Nikkei soars on government plan

Japanese shares have soared after the government said it would use public funds to help companies struggling to cope with the economic downturn.

Confirmation of the capital injection sent the main Nikkei share index up 378.93 points, or 4.93%, to 8,061.07.

Aid will only be provided to companies that are facing difficulties raising funds because of the credit crunch.

Shares were also helped by a weaker yen, which helps to make Japanese exports more competitive overseas.

Improving profitability

"We want to support companies that we think are important for Japan and for regional economies, regardless of their size," said Economy, Trade and Industry Minister Toshihiro Nikai.

"We're not specifying any sectors," added a ministry official.

Japan's trade ministry said companies receiving funds would need to draw up plans to improve profitability within three years.

"Bankruptcies have been increasing, and not only among financial firms. There have been reports that funding has been tight at many large corporations," said Soichiro Monji at Daiwa SB Investments.

Despite the boost to share prices, some analysts are unsure what impact the stimulus package will have on the wider economy.

"I think we might see some speculative moves to buy shares and sell the yen, but it is unclear just how much such an injection of public funds would support the economy," said Tohru Sasaki at JP Morgan Chase.