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Freezing the fiscal austerity law should be the last resort when the new Cabinet tries to revive the moribund economy, Finance Minister Hikaru Matsunaga said Tuesday.

He made the remark in reference to policy agendas of the three candidates for the ruling Liberal Democratic Party presidency. Foreign Minister Keizo Obuchi and former Chief Cabinet Secretary Seiroku Kajiyama advocate freezing the law, while Health and Welfare Minister Junichiro Koizumi wants it abolished.

In a regular news conference, Matsunaga expressed support for Kajiyama. But he said he hopes new pump-priming measures will be taken under the revised fiscal reform law. Freezing the law or other measures should be discussed only when it becomes clear the current framework cannot be sustained, Matsunaga said.

Matsunaga was also cautious about Kajiyama’s idea that commercial banks should be forced to put up loss reserves for all their problem loans. Loans in the “second-category,” which require monitoring, are not necessarily bad loans, Matsunaga stressed. Excessive regulations there could worsen the credit crunch because banks might suspend such loans, especially to small firms, he added.

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