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Merging weak major banks with stronger ones is better than using the government’s proposed “bridge bank” scheme, Masaharu Hino, chief of the Financial Supervisory Agency, said Tuesday.

It was the second consecutive day that the government spent distancing the nation’s top 19 banks from its “bridge bank” plan, the as-yet-unrealized scheme to weed weak institutions out of the battered financial system.

On Monday, Finance Minister Kiichi Miyazawa said “new measures” are possible if a major bank fails. Hino clarified that remark Tuesday, telling the Lower House Budget Committee that “new measures” referred to “mergers and acquisitions.”

Hino’s view that mergers would be better in dealing with troubled big banks echoes that of Bank of Japan Gov. Masaru Hayami, who told the committee Monday that mergers and operation transfers should be given priority.

Miyazawa seemed to express understanding toward Hino’s remarks Tuesday, saying that “in legal terms” the FSA head’s interpretation was possible.

Various government officials in recent days have indicated that the government’s bridge bank plan should not be applied to the nation’s 19 major banks if any should fail. Applying the bridge bank scheme to major banks, they fear, could spark domestic and international concern and further undermine Japan’s banking sector.

But opposition parties as well as some financial critics at home and abroad are expressing their own concern that any “soft landing” measures may fail to bring about a fundamental restructuring of the sector.

Takeshi Noda, secretary general of the Liberal Party, charged during the committee session that the government was trying to delay solving the sector’s problems by saving the major banks, although some of them are in fact too weak to continue operations.

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