/www.bloomberg.com/ By Yoshiko Matsushita, Hideki Asai and Daisuke Takato, with reporting by Mayumi Otsuma
Tokyo, Oct. 21 (Bloomberg) -- Prime Minister Junichiro Koizumi said he'll help companies and workers likely to be hurt by his government's efforts to speed the disposal of some $419 billion of bad loans at Japanese lenders.
``The government will do its utmost to provide for a safety net,'' Koizumi said, answering legislators' questions. He added that the measures wouldn't require an extra budget during the current session of the Diet, which started Friday and ends in December.
Koizumi's government is preparing to release measures this week to fight falling prices and speed the disposal of bad debts -- an effort that the Bank of Japan suggested today it might support by supplying more money to the banking system.
Bad-loan write-offs will probably push more companies into bankruptcy and raise unemployment, which is already near a record high at 5.4 percent. Koizumi said Japan would have to accept ``a couple of years'' of low economic growth before his measures produce a lasting recovery from the nation's 12-year slump.
``We're considering steps to accelerate bad-loan disposals during the half year'' to March 31, Koizumi said at a U.S.-Japan trade conference. ``These will be unveiled soon.''
Japan's new minister for financial services, Heizo Takenaka, will announce plans Tuesday to tackle bad loans, Hidenao Nakagawa, a ruling Liberal Democratic Party official, said yesterday.
Central Bank
Bank of Japan Governor Masaru Hayami, in a speech to regional managers, signaled the central bank may provide more funds to the money markets in case the government fulfills promises to speed up bad loan write-offs.
The bank will support ``efforts to overcome the bad-loan problem quickly and stabilize the financial system,'' Hayami said. ``The Bank of Japan will continue to do its best to stop continuous price declines.''
Japanese bonds rose for the first day in three after Hayami's remarks on speculation the central bank would buy more government bonds to add money to the financial system.
The No. 242 bond, which carries a 1.2 percent coupon and matures in 2012, rose 0.181 to 101.209 as of 3:47 p.m. Tokyo time. Its yield fell 2.0 basis points to 1.065 percent. A basis point is 0.01 percentage point.
Hayami today also repeated pledges to pump more money into the economy ``regardless of its reserve target, if there is unstable movement in financial markets.''
The central bank makes 1 trillion yen of outright purchases of government bonds from lenders each month and makes as much as 15 trillion yen in reserves available to banks. It has kept interest rates near zero since March last year.
Koizumi said he welcomed signs of cooperation from the central bank, which last month announced an unprecedented plan to buy shares from lenders such as Mizuho Holdings Inc. to limit their losses from plunging share prices. The Nikkei 225 Stock Average has fallen 23 percent in the past six months.
``I have hopes that the central bank will take effective policies from both the quality and quantity point of view,'' Koizumi said. Details ``must be decided by the central bank.''