Japanese Prime Minister Junichiro Koizumi said in an interview broadcast yesterday that his government would come up with concrete steps in October to speed up banks' disposal of bad loans.
The move follows the Bank of Japan's announcement last week that it would take the unprecedented step of buying stocks directly from banks to protect them from market turbulence.
"The Bank of Japan cannot do it all alone," Koizumi said in a Fuji Television Network interview taped Friday afternoon.
"I would like the government to take one more step in October, to come up with concrete measures to speed up disposal of bad loans and restore health to financial institutions," he said.
Koizumi said the step would "be supportive of the bank's move, which was enacted so there would be no more anxiety over stock prices."
The premier put a high priority on the problem of bad loans, which weighed down banks to the tune of ?43.2 trillion (US$366 billion) in March, rather than on Japan's falling prices, with consumer prices down year-on-year in July for the 35th consecutive month.
"If bad-loan disposals don't proceed, banks will not start productively lending money," he said.
When the interviewer pressed Koizumi for concrete measures immediately and said market participants were expecting them, the premier said: "It's too fast for concrete measures. We can't rush into things."
Koizumi reiterated a pledge to cut taxes by more than ?1 trillion in the fiscal year to March 2005, to be balanced with tax increases perhaps in the future.
"I think the direction of the tax reform will come out in October and November. And even though tax reform is to be enacted in fiscal 2003 [starting next April], an early tax cut could come as early as next January," he said.
The prime minister, who returned from a landmark one-day summit in North Korea on Tuesday, left for Copenhagen on Saturday to attend the Asia-Europe Meeting and will not head back to Japan until Wednesday.
Some critics have hit Koizumi for putting domestic economic policies on the back burner in favor of poll-boosting foreign policy excursions.
On Wednesday, the Bank of Japan took the policy lead by declaring it would buy stocks directly from banks to reduce their exposure to the market. Media reports said the amount could be as large as ?4 trillion.
The move came as Japan's top ministers also debated, sometimes in contradiction with each other, whether banks need a public injection of funds to restore their fiscal health. With a cabinet re-shuffle discussion set on the heels of Koizumi's return from Copenhagen, the prime minister said he would settle the debate.
"It seems as if opinions are different but I will coordinate them," he said.
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