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Prime Minister Ryutaro Hashimoto appealed Friday for increased efforts to resolve financial institutions’ bad loan problems as soon as possible to facilitate economic recovery.

Speaking at the first meeting of a government and ruling bloc task force on the problem, Hashimoto said a comprehensive program is required to promote disclosure of financial institutions’ bad loans and make use of real estate put up as collateral for the loans. “Given the present state of the economy, no time can be wasted in resolving the bad loan problem,” he said.

The task force aims to lay out specific measures to promote disposal of nonperforming loans, a result of the burst of the economic bubble and a primary cause of the prolonged economic slump. This initiative follows a pledge made by Hashimoto at the recent summit meeting of the Group of Eight industrialized countries in Birmingham, England.

Headed by Chief Cabinet Secretary Kanezo Muraoka, the council will create a comprehensive plan to boost land transactions in a bid to help financial institutions get rid of their nonperforming assets. The plan is included in the economic stimulus package announced last month but specifics have yet to be hammered out. “In short, the first priority is to remove nonperforming loans from the balance sheets of financial institutions,” Hashimoto said at the outset of Friday’s meeting.

To that end, it is necessary to clarify banks’ bad loans and to promote efficient utilization of collateral land, he said. Banks have put up reserves to cover loan losses on their balance sheets, but that procedure alone does not eliminate the nonperforming assets.

The government initiative would aim to secure real estate-backed loans and set up a body to mediate negotiations between creditors and borrowers to hasten transactions of collateral land. Realignment of financial firms is also expected to be discussed by the task force as expediting disposal of bad loans may endanger some banks.

Koichi Kato, secretary general of the Liberal Democratic Party, said Friday that an extraordinary Diet session is needed just after the Upper House elections in July to pass bills necessary for financial institutions to write off their nonperforming loans.

Kato told a news conference that he brought up the possibility Friday morning to a task force made up of members of the government and ruling parties. “We are serious in tackling this bad loan problem,” Kato said. “We cannot wait to hold an extraordinary Diet session in October as we usually do.”

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