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In Upbeat Sign, Japan Says Bad Debt Falling

June 07, 2004|From Reuters

TOKYO — Japan's economy is stronger than before, as evidenced by a decline in its massive nonperforming loans, Economics and Financial Services Minister Heizo Takenaka said Sunday.

"There are cyclical factors, but the underlying part is stronger," Takenaka said on a television program, adding that the ratio of nonperforming loans to banks' total loans fell sharply.

"Although there are problems at individual institutions, the financial system overall is healthier," he added.

Japan's economy grew at a rate of 5.6% in the January-March quarter, outstripping U.S. growth of 4.4% in the period.

Takenaka said banks needed to work to resolve problems with some large, troubled corporate borrowers.

Asked about using the state-backed Industrial Revitalization Corp. of Japan (IRCJ) to revive troubled retailer Daiei Inc. and others, Takenaka said that was one option, but banks needed to talk with creditors.

The Nihon Keizai newspaper reported Saturday that banking group UFJ Holdings Inc., which reported a third straight year of losses last month, would start talks with the IRCJ to revive trading house Nissho Iwai- Nichimen Corp. and condominium developer Daikyo Inc.

On economic policy, Takenaka said in an interview published Saturday that the Bank of Japan should take monetary easing measures in line with the government's target of achieving 2% nominal growth in fiscal 2006-07.

"We know it is not directly the ... target" of the Bank of Japan, he said. But, he added, "we have confirmed that we have a cooperative stance" with the central bank on fighting deflation.

Bank of Japan Gov. Toshihiko Fukui has sought to distance monetary policy from the government's growth target, saying it was committed to fighting deflation but not to achieving a specific growth rate.

At a meeting in April on economic policy, Fukui said the Bank of Japan would work closely with the government but wouldn't be held accountable for the government's target. The central bank has vowed to stick to its hyper-easy monetary policy until changes in core consumer prices rise into positive territory on a sustained basis.

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