Japan govt plans bill to help struggling borrowers

TOKYO, Oct 20 (Reuters) - Japan’s government said it will introduce a bill to help debt-squeezed small firms and individuals with financing, but it was unclear if it would include a controversial moratorium that has spooked investors.

Talk of the plan, which was first proposed last month by newly appointed banking minister Shizuka Kamei, has helped spark a sell-off in Tokyo banks such as Mitsubishi UFJ Financial Group 8306.T, on fears of an increase in bad loans.

Kamei’s deputy, Vice Minister Kouhei Otsuka, said on Tuesday the government aimed to introduce a temporary law -- lasting until March 2011 -- to help firms and individuals struggling with their loan payments.

The law will request financial firms to “make an effort” to change loan terms for some borrowers. But it remained unclear if it would include a temporary halt in repayments. (Reporting by David Dolan)