21 June 2001, 14:41  Japan to urge banks to sell NPLs to govt's RCC if not disposed of in 2-3 yrs

TOKYO (AFX-ASIA) - The government said it will urge the major 16 banks to sell their bad loans to the Resolution and Collection Corp if they fail to dispose of the loans within two to three years.
The plan is part of a series of measures outlined by the government today in its blueprint for economic, fiscal and structural reform. The government said it also plans to approve the RCC to act as a trustee for bank assets to help banks speed up their non-performing loan write-offs.
The RCC is expected to play a role -- modeled on the Resolution Trust Corp of the U.S. -- in securitising banks' bad loans, as well as secured real estate, to help reduce bad loans and stimulate property transactions, it said.
Meanwhile, the Financial Services Agency is expected to introduce tougher standards for assessing banks' exposure to bad loans in an attempt to contain new non-performing debt.
The government is proposing two new standards to assess the banks; the ratio of bad loans to total revenues; and the ratio of bad loan write-off losses to total lending.
The government is expecting "slow" GDP growth in the year to March 2002 and 2003 GDP, with the year to March 2002 GDP substantially below its existing target of 1.7 pct.
"The economy in Japan is about to worsen and it is expected that economic growth for the fiscal year 2001 (year to March 2002) will be considerably lower than the original governmental economic forecast," the blueprint said.
It added that the government expects a recovery from the year to March 2003 if the U.S. economy begins picking up from the end of this year, leading to an improvement in Japanese exports, output and capital spending.
"By strongly exercising structural reforms in the private, public and financial sectors, the Japanese economy will be able to leap back to life over the next ten years."
In the medium-term, the economy is expected to achieve private-demand led growth through structural reforms.
The government will contain the issuance of new government bonds below 30 trln yen in the year to March 2003 budget as a first step in its planned fiscal reforms, aiming eventually for a budget surplus. Of the remaining spending, it will place more focus on key areas; the life-sciences, information technology, the environment, the ageing economy, rural development, large-city development and nano-technology.
Japan will also overhaul the public sector and public-linked corporations.
"We will introduce competitive rules in areas that have been supplied by public or non-profit entities, such as the medical industry, nursing, welfare and education."
The government will review existing public works projects that have not yet been implemented to determine whether they should go ahead, as well as inviting private companies to participate.
It will also examine the status of Nippon Telegraph and Telephone Corp as part of plans to promote a fair and competitive communications market, and study the possibility of an auction system for distributing wireless spectrum.
Japan will thoroughly review corporate tax, examining the possibility of introducing a group tax-payment system, where taxable profits can be netted off with losses from other group companies.

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