By Takashi Nakamichi Of DOW JONES NEWSWIRES TOKYO (Dow Jones)--Japanese companies have been steadily tapping cheap dollar loans from the government to snap up overseas assets, a trend Tokyo hopes will continue in the coming months and further boost the U.S. currency against the yen. Since the government-affiliated Japan Bank for International Cooperation extended the program's first loan in November, firms have taken out $3.92 billion in greenback-denominated loans to finance part of their overseas M&As or buy foreign resources, a Finance Ministry official told Dow Jones Newswires Thursday. Of the total, $1.42 billion was for two M&A deals, announced in February by Sony Corp. and Toshiba Corp., the official said. The rest was for seven cases involving the buying of foreign resources. "We expect (the private-sector use of JBIC dollars) to gain momentum" partly on the back of a continuing overseas M&A boom among Japanese companies, the official said. The prospect of firms being lured into M&As by low interest and favorable exchange rates has raised hopes among Japanese currency policy makers that flows of private sector money out of the country may increase, taking more steam out of the yen's strength. The ministry introduced the lending program, which it dubbed the "Emergency Facility To Deal With The Strong Yen," last August as a one-year measure to stem the currency's relentless rise. The program aims to fuel overseas investments by Japanese firms and, at the same time by financing only part of such deals, prompt borrowers to procure more dollars themselves in a way that will boost the U.S. currency versus the Japanese currency. This idea emerged as it grew increasingly costly and diplomatically more difficult for Japan to influence the yen's exchange rates through direct government intervention in the huge global currency market. Japanese officials also wanted to exploit some positive aspects of the strong yen. Analysts consider outflows of private sector funds to be one reason, if not the main one, behind the dollar's roughly 10% recovery against the yen since February to an almost one-year high of Y84. A "steady but increasing pace of outflows from M&A activities by Japanese firms is adding further momentum to yen weakness," Barclays Capital said in a report last week. Loans extended under the facility are small, particularly compared with a record $80 billion Japanese firms are estimated to have spent for outbound M&A investments last year. But the amount of loans outstanding could more than double in coming months, as the facility and Japanese firms' M&A boom should feed each other, other finance ministry officials have said. JBIC is currently negotiating with other companies the use of the facility, they added, without elaborating. First set up at $100 billion and later enlarged to roughly $130 billion, the program allows JBIC to borrow that much of dollar from the government's $1.3-trillion foreign currency reserves, and then lend firms those funds at lower rates than private-sector banks. JBIC is allowed to finance up to 60% of loans for overseas M&A deals and 70% of those for the buying of foreign resources. February's moves by Sony and Toshiba have fueled expectations among finance ministry officials that companies have finally become ready to take advantage of the program for cross-border corporate buyouts after spending months to design and negotiate deals. -By Takashi Nakamichi, Dow Jones Newswires; +81-3-6269-2818; takashi.nakamichi@dowjones.com

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