Mon, Mar 04, 2002 - Page 17 News List

Japan may be close to the bottom

REGIONAL ECONOMY Japanese officials say it can't get much worse and that now would be the perfect time to put new structural reforms in place

BLOOMBERG , TOKYO

The Japanese economy is close to hitting the bottom so the government should be able to carry out structural reforms at the same time, Japan's Economic and Fiscal Policy Minister Heizo Takenaka said.

"In terms of an economic cycle, the economy is close to hitting bottom. This is the stage at which we should conduct structural reforms," Takenaka said on Asahi National Broadcasting Co's television program "Sunday Project."

He also said he is confident the government will be able to fight deflation by completing almost all of its anti-deflation package released on Feb. 27.

"I have a sense of accomplishment about the plan. I believe that the government can realize the plan almost 100 percent," he said.

Under the plan, Japan will use its Resolution and Collection Corp to buy more bad loans from banks, aiming to snap a five-year slide in lending and stamp out deflation. Japan's 17 biggest banks had ?22.5 trillion (US$167 billion) of bad loans as of Sept. 30, a 9.2 percent increase in six months, according to government estimates.

The package contains no new pledge to inject funds into lenders, except in times of crisis, and no measures to spur consumer spending. The Bank of Japan is already implementing the measure that calls for the central bank to increase its monthly bond purchases by a quarter to ?1 trillion.

The anti-deflation package also calls for restrictions on short-sales, in which traders sell borrowed stock, to make it harder to profit from falling share prices. The Financial Services Agency has asked three companies which loan stock to brokerages for margin trading, including Japan Securities Finance Co, to impose a fee on those who want to sell borrowed stock.

"But we aren't saying that short-selling itself is a bad thing," Takenaka said.

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