Japanese Prime Minister Juni-chiro Koizumi said he'll do whatever is needed to avert a banking crisis and take measures to combat price declines amid the nation's third recession in less than a decade.
In a policy speech to parliament, Koizumi said he's also committed to forcing banks to write off bad loans by April 2005, reviving private demand and returning the world's second-largest economy to growth.
"We'll take any measures that are necessary to prevent a financial crisis," Koizumi said. "With the Bank of Japan, the government will try to fight deflation, and starting in fiscal year 2004 we'll try to realize economic growth led by private demand."
Koizumi's comments may provide little comfort to investors as Japan slips deeper into recession.
Analysts have said Japan may have to inject taxpayers' money into the banking system to keep banks from collapsing on March 31, when a reduction in the government's deposit guarantee may prompt a rush on bank savings.
The central bank's policy of pouring trillions of yen into the banking system has failed so far to halt price declines. Core consumer prices, which exclude fresh food, posted their steepest decline in three decades last year, dropping for a second year.
Koizumi said the economic outlook for the year starting on April 1 is "tough."
The economy will probably post zero growth in the coming fiscal year after contracting 1 percent this year, the government estimates.
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