/www.bloomberg.com/ By Anindya Mukherjee and Kazu Hirano
Kuala Lumpur, Oct. 6 (Bloomberg) -- Japan's new Minister for Financial Services, Heizo Takenaka, said the world's second biggest economy may grow more than estimated in the fiscal year to March and the following year.
Growth may be ``a little higher. That is my personal expectation,'' Takenaka, who earlier said he would unveil a plan to tackle trillions of yen of bad loans at Japan's banks by the end of the month, told the World Economic Forum's East Asia summit.
Takenaka's comments are welcome news to a region faced with a slowdown in growth as exports falter with demand easing in the U.S., the biggest importer of Asia-made exports, which buys $300 billion of products a year.
Japanese bank lending, weighed down by the bad loans, hasn't risen since September 1996, choking the economy of the credit it needs to grow. Household spending in the country fell a second month in August as shrinking wages and near record unemployment kept consumers away from stores.
Some analysts say the drop in consumer spending may sharpen this year as companies such as Sanyo Electric Co. cut jobs and wages to make up for a slump in demand made worse by four years of falling prices.
Takenaka is also minister for economics and policy. Japan's Cabinet Office, which he heads, has said it expects gross domestic product growth of 0.2 percent this fiscal year and 0.6 percent growth the following year. The government says it expects zero growth this year. Bad Loans Plan
Appointed last week as bank stocks plunged and investors fretted rising bad debts would slash profits in an industry that has been bailed out twice in four years, Takenaka said he would unveil a plan to tackle trillions of yen of bad loans at the nation's banks by the end of the month.
The proposals, which may include using public money to help banks speed up bad-loan disposals, will ``minimize cost'' and ``maximize merit'' he said.
Tax breaks for Japanese companies and further liberalization of the investment regime to be announced around the time the plan is unveiled may reduce the hardships, he said at a press conference at the opening of the World Economic Forum meeting in Kuala Lumpur today.
``I recognize this kind of coordinated action is quite important,'' Takenaka said. Still, there could be ``some bankruptcies,'' said the minister, who was appointed to the post in a cabinet reshuffle on Monday.
The comments came as the index of Japanese banks stocks such as UFJ Holdings Inc. completed its biggest weekly slide in four years last week on concern a government bad-loan task force created may recommend seizing weak lenders and forcing their worst customers into bankruptcy.
Japan's Financial Services Agency in April estimated the total non-performing loans at Mizuho Holding Inc. and other major lenders as of March 31, 2002, rose 49 percent to 26.8 trillion yen ($217 billion) from the year earlier period.
Kimura's Force
Takenaka, who heads the FSA in addition to his duties as minister for economics and policy, on Thursday appointed the president of KPMG's Japan unit, Takeshi Kimura -- an advocate of seizing banks and letting the worst borrowers fail -- to head a 11- member task force to clean up bad loans that are crippling lenders. The task force has yet to decide whether to use public funds as an option to revive the banking industry, he said. Kimura, who worked at the Bank of Japan from 1985 to 1998, has criticized the government for doing too little to clear bad loans that forced banks to cut lending to risky borrowers.
An interim report will be ready in two weeks, Takenaka said. Prime Minister Junichiro Koizumi has told him to focus on solving the bad-loans problem in two years, he said.
``We should consider some special tax schemes to stop asset deflation,'' Takenaka said in a lunch speech later. The government, he said, may ask the Bank of Japan to consider ``some kind of additional policies.''
In order to come up with a worthwhile plan to tackle bad loans, the task force will cover three broad areas -- accurate measurement of bank assets, sufficiency of their capital and standards of corporate governance, Takenaka said.