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Panel seeks stricter inspections to solve bad-loan mess.

TOKYO, Feb. 15 Kyodo

(EDS: RECASTING WITH END OF MEETING)

Members of the government's key policy-making panel agreed Friday the government should seek to end the problem of nonperforming loans at banks by the end of March through stricter bank inspections, economic and fiscal policy minister Heizo Takenaka said.

''Special inspections should be conducted strictly to assess the banks' loans so that the results will be reflected in their financial accounts for the current fiscal year ending at the end of March,'' Takenaka told a news conference after a meeting of the Council on Economic and Fiscal Policy headed by Prime Minister Junichiro Koizumi.

''With this measure, the bad-loan problem will move toward an end,'' he said.

The Financial Services Agency (FSA) began special inspections of major banks last October as part of efforts to resolve the problem of the massive amount of bad loans at banks.

The panel met Friday night to discuss measures to accelerate the disposal of nonperforming loans at banks and to stabilize the nation's banking system, part of antideflation measures to be compiled by the end of this month.

Finance Services Minister Hakuo Yanagisawa, who is not a member of the council, also participated in the meeting.

On Wednesday, Koizumi instructed his cabinet members to put together a comprehensive package of antideflation measures by the end of this month and called on the Bank of Japan to take bolder steps to that end.

Takenaka said the government will take necessary measures if banks' capital-adequacy ratios fall as a result of the FSA's special inspections.

He said the panel also agreed that the government will tighten rules to restrict the so-called short selling of stocks.

Some government officials believe speculative short selling is one of the causes of recent plunges in Japanese stock prices.

Stating that Japanese share prices are ''undervalued,'' Takenaka said, ''It is important to strictly regulate short selling and margin trade based on rules.''

Takenaka also said there was discussion as to whether it is necessary to again funnel public funds into banks whose capital bases are expected to be depleted following bad-loan disposal.
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Publication:Japan Weekly Monitor
Date:Feb 18, 2002
Words:351
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