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Yanagisawa: Bad Loans Disposal Not Satisfactory Pace

June 7, 2001

TOKYO (Dow Jones)--Japan's banks haven't been disposing of their problem loans at a satisfactory rate, Japan's minister in charge of the financial system said Thursday.

"I'm not necessarily satisfied with the pace of decline in problem loans," Hakuo Yanagisawa said at an international conference.

During the most recent fiscal year ended March 31, dud loans at the nation's nine largest banks, as measured under government standards, edged up 1.1% to Y18.0 trillion.

Yanagisawa added he would like to see more banks switch over to lending on a project-by-project basis instead of financing companies in general as has often been the case.

This approach would enable financial institutions to quickly cut off funding for a failed project and promote the process of differentiating between good and bad loans, he said.

Yanagisawa said that unless there was a danger of a deflationary spiral, there shouldn't be expectations for demand stimulus steps.

The minister said that instead of such measures, structural reforms on the supply side are needed to bolster the economy.

"Demand side steps shouldn't be expected unless there is a danger of falling into a deflationary spiral," he said.

Titles of speakers, names of companies, etc., were correct as of the time when the forum was held.