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Finance Minister Masajuro Shiokawa said Tuesday he expects the Bank of Japan to respond appropriately to current economic conditions but monetary policy remains in the realm of the central bank.

“It’s not proper for me to talk about monetary policy,” Shiokawa told a regular news conference. “I think Gov. (Masaru) Hayami and the BOJ staff will take proper policy measures.”

Taku Yamasaki, secretary general of the ruling Liberal Democratic Party, pressured the BOJ on Monday to take more steps toward monetary easing.

According to government data released Monday, first-quarter gross domestic product contracted 0.2 percent in real terms from the previous quarter, fueling analysts’ fears that Japan has entered another recession.

A draft of fiscal and economic guidelines adopted Monday by the prime minister’s Council of Economic and Fiscal Policy urge the BOJ to take quantitative monetary-easing steps as needed if the economy remains under deflationary pressure during the nation’s reform efforts.

The BOJ adopted a policy of quantitative monetary easing March 19 by shifting its monetary policy target from the unsecured overnight call rate to the balance of funds held in current accounts at the central bank, effectively resuming the “zero-interest-rate” policy.

On the state of the economy, Shiokawa said he is worried but not thinking about fiscal stimulus at this stage.

Meanwhile, Heizo Takenaka, minister in charge of economic and fiscal policy, said Tuesday he hopes to attend the BOJ’s policy-setting meeting this week to improve coordination between the central bank and the government as it attempts structural reform.

“I would like to explain the government’s commitment to structural reforms and hold constructive discussions on how to harmonize government and monetary policy,” Takenaka told a press conference.

Cabinet ministers rarely attend meetings of the central bank’s Policy Board, usually leaving such duties to lower-ranking officials from the Finance Ministry and the Cabinet Office.

“I hope to attend every meeting (of the Policy Board) if my schedule permits,” Takenaka said.

The Policy Board will meet Thursday and Friday.

Bad-loan worries

Financial services chief Hakuo Yanagisawa said Tuesday the amount of bad loans could rise if Japan fails to achieve an economic recovery soon.

“You can’t say the genesis of new bad loans has nothing to do with economic conditions,” Yanagisawa told a news conference.

Asked about the possible negative effects the disposal of bad loans could have on employment, Yanagisawa said it will depend on how the loans are disposed of, and on the type of corporation.

The government has set a two-year deadline for major Japanese banks to remove from their books outstanding loans to borrowers that are bankrupt or on the brink of collapse, and a three-year limit for any new loans that turn sour.

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