JAPAN EXPECTED TO CUT BASE RATE FOR STATE BODIES

  Japan is expected to cut the base lending
  rate for state financial institutions to 5.5 pct from 6.2 as
  part of the recent pact by major industrial nations in Paris,
  Finance Ministry sources said.
      They said the cut is based on a revision of the Trust Fund
  Bureau Law, which should be approved by parliament on March 3,
  abolishing the 6.05 pct minimum interest rate on deposits with
  the bureau.
      The bureau channels funds to government financial
  institutions for public works and other official uses, they
  said.
      The base lending rate for state bodies such as the Japan
  Development Bank, People's Finance Corp and the finance
  corporations of local public enterprises usually moves in
  tandem with long-term prime rates, the sources said.
      However, it was impossible for them to follow the last cut,
  to 5.8 pct from 6.2 pct on January 28, because the Trust Fund
  Bureau rate was legally set at 6.05 pct.
      The ministry will abolish the minimum rate and introduce a
  market-related one to resolve the problem and stimulate the
  domestic economy, they said.
      On Tuesday, the ministry allowed long-term bankers to cut
  their prime to a record low of 5.5 pct, effective February 28.
  The move suggested it had reached agreement with depositors
  using the bureau, the postal savings system of the Posts and
  Telecommunications Ministry and the Japan welfare annuity of
  the Ministry of Health and Welfare, the sources said.
      These ministries are trying to determine which market rates
  should be considered when setting the bureau's deposit rate,
  the ministry sources said.
      Coupon rates on new 10-year government bonds, minus 0.1
  percentage points, is the likeliest choice, they added.
  

