The United States on Friday expressed concerns over whether Japan’s bank recapitalization law will be effectively used to solve its banking trouble.U.S. Treasury officials raised the question at working-level talks with the Finance Ministry held in Tokyo, according to officials from both sides. The two-day talks, initially intended to monitor progress on a 1995 bilateral accord on the liberalization of financial services, ended Friday.U.S. officials asked whether weak banks will actually apply for capital injection under the new law, and whether the public funds will work effectively to help write off bad loans held by the banks, a senior Finance Ministry official told reporters.American representatives “called on the (Japanese) authorities to take action now to use the funds quickly and aggressively,” a senior U.S. official said. Their concerns emerged as Japanese banks appear to be reluctant to apply for public funds because the management may have to take responsibility. But the U.S. officials did not urge Tokyo to forcibly inject capital into “weak but viable” banks, the Japanese official said.Japanese officials were not in a position to answer the questions directly because they are not involved in a financial resuscitation committee, the official said. The panel is to be set up as early as next month to manage the new banking reform scheme, including capital injection from a 25 trillion yen fund.
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