Japan development bank
may set up aid for Daiei

The retailer carries debts of $17 billion

---

Bloomberg News

KOBE, Japan >> Daiei Inc., a Japanese retailer that has become a test case of the government's willingness to let debt-ridden companies fail, may get its second bailout this year, including its first infusion of public money.

The Development Bank of Japan, which is funded by public pensions and government-run postal savings accounts, said it may invest in a fund along with Daiei's three major lenders to help prop up the company. The supermarket operator has total debt of about $17 billion, or almost 40 times its market value.

Using public money to keep the retailer afloat may mean Prime Minister Junichiro Koizumi is willing to exempt major employers such as Daiei, which has 96,000 employees, from recent pledges by the government to force banks to cut off weak borrowers.

"The government is signaling that it won't let Daiei go under," said Makoto Kikuchi, who helps manages ¥500 billion ($4 billion) at PCA Asset Management Co.

Daiei shares tumbled more than 50 percent in five days earlier this month, dropping below ¥100 for the first time, after Koizumi installed new regulators who suggested they were prepared to let Japan's so-called zombie companies go under.

The shares surged ¥22, or 19 percent, today, to close at a two week-high of ¥139.