Although Japan’s economy is currently not in crisis, the government will keep a watchful eye on its course and is ready to use all available means to deal with any problem that crops up, according to Chief Cabinet Secretary Yasuo Fukuda.
In an interview Tuesday, Fukuda also emphasized the importance of Japan and North Korea resuming normalization talks, an agreement on which was reached between Prime Minister Junichiro Koizumi and Kim Jong Il on Sept. 17.
“(Japan’s) economic fundamentals are not necessarily bad right now,” said Fukuda, who continues to serve as the government’s top spokesman in Koizumi’s reshuffled Cabinet.
The economic situation surrounding Japan, however, has deteriorated over the past several months, with the prospects of recoveries in the U.S. and European economies clouded amid recent falls in share prices on major markets, Fukuda said.
Bearing this in mind, the government “will not rule out anything” that would help Japan’s economy weather the difficult times ahead, Fukuda said.
One contentious area in the ongoing debate over the economy is the question of whether the government will decide on a fresh injection of public funds into banks as they try to accelerate their disposal of problem loans.
As a pillar of his structural reform measures, Koizumi has pledged to end Japan’s bad-loan problems by the end of fiscal 2004.
“The government will decide on the matter after examining the report to be presented by a project team on financial issues,” Fukuda said, referring to a government task force recently created by Financial Services Minister Heizo Takenaka that is set to hammer out measures to eradicate bad loans by mid-October.
Calls for the banks to be recapitalized with public funds are mounting within the ruling coalition parties because bad loans are piling up faster than the banks can write them off. The banks, reluctant to pull the plug on loans to dying companies, have turned to debt waivers and other bailout measures.
“The team will likely present a comprehensive scenario (to revitalize the country’s financial system),” Fukuda said. “In line with that, we will take everything into consideration.”
Regarding another hot issue — whether the government will compile a supplementary budget for the current fiscal year to support the economy as it undergoes aggressive measures to get rid of the bad debts — Fukuda said, “It is still too early to say anything definite.”
Earlier Tuesday, Koizumi hinted that the government may draft an extra budget for fiscal 2002 to fund a social safety net for people who lose their jobs as a result of the likely increase in corporate bankruptcies.
“The prime minister never meant to say the government will do that,” Fukuda said. “He has said, however, that he will deal ‘flexibly and boldly’ with the economic situation if such a need arises.”
With regard to Japan’s normalization talks with North Korea, expected to begin later this month, Fukuda said a specific date or venue for the talks have yet to be decided. Some media reports say the two sides plan to meet Oct. 29 and 30 in Kuala Lumpur.
Asked if the government will begin normalization negotiations before further investigations are conducted into North Korea’s abduction of Japanese nationals, Fukuda underscored the importance of the two sides first engaging in talks.
Last week, the government disclosed a report by its fact-finding team to North Korea, in which Pyongyang provided details about how seven of the 13 abductees had died. The report, however, has infuriated their families, who have dismissed the allegations as fabrications.
“We are aware of the sentiment of the families of the abductees, but resolving all our concerns before the resumption of the talks would be difficult,” Fukuda said. “Remaining problems should be resolved after the two sides are engaged in negotiations.”