TOKYO (AFX-ASIA) - Finance Minister Masajuro Shiokawa said Minister of Financial Affairs Hakuo Yanagisawa has said the Financial Services Agency cannot take action to force the banks to write-off bad debt. "Major Japanese banks are unwilling to write-off their bad loans because of possible bank management responsibility," Shiokawa said, referring to the issue of who would be ultimately responsible for such a course of action.
"Yanagisawa told me the FSA cannot take action to force the banks to write-off bad loans by injecting public funds. "Yanagisawa said that the FSA has no option but to tighten up supervision of the banks bad debts and ask them to speed up the write-offs," he said.
"I myself want to do that (inject public funds) if possible but we cannot do so because Japan is a democratic economy. We have to respect market principles," Shiokawa said.
Shiokawa also said that the Bank of Japan "should ease monetary policy further to limit price declines, which will lead to boosting the economy."
He said the government should be cautious on structural reforms, paying attention to the risk of economic dislocation that could arise. "If the Japanese economy shows signs of contraction, we will take all possible stimulus measures to prevent this," he said. At the same time, Shiokawa said that "even if the government faces the risk of an economic contraction, it will still keep the 30 trln yen government bond issuance target."
The finance minister, referring to recent stockmarket weakness, said: "I hope the market goes up, if possible, to 14,000-15,000 points; the current stock price level is too low.
"The government cannot take action directly on the stockmarket but investment trusts should try to increase their returns by increasing their portfolios," he added.