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Prime Minister Junichiro Koizumi on Friday instructed Cabinet ministers in charge of the economy to accelerate banks’ final disposal of nonperforming loans.

Following the day’s Cabinet meeting, Koizumi discussed the bad-loan issue with Chief Cabinet Secretary Yasuo Fukuda, Finance Minister Masajuro Shiokawa, Financial Services Minister Hakuo Yanagisawa and Heizo Takenaka, minister in charge of economic and fiscal policy.

Speaking at a news conference, Shiokawa quoted the prime minister as saying that although the final disposal of bad loans might hurt both large and small businesses, national revitalization will not be achieved without tackling the problem.

Shiokawa said that the top economic policymakers acknowledged the need for the government to closely monitor the bad-loan cleanups.

“To the public, banks’ financial conditions are only visible every six months when their business results are announced,” Shiokawa said. “Their financial state, meanwhile, remains in a ‘black hole’ in between.”

The Financial Services Agency will therefore hold hearings with banks in the near future and ask them to report on their disposal efforts, he said.

In an emergency economic package adopted by the government in April, major banks were urged to remove their outstanding problem loans from their balance sheets in two years and dispose of loans that may subsequently turn bad within three years.

The bad-loan problem is expected to become a major discussion topic when Koizumi meets U.S. President George W. Bush on June 30 in Camp David, Md.

The FSA has been working on a new set of measures to accelerate the disposal of bad loans, and Koizumi is expected to explain these proceedings to Bush.

But Yanagisawa played down the impact of the bad-loan problem.

“The problem of bad loans is not necessarily the biggest cause of economic stagnation,” he said at Friday’s news conference. “It requires balanced and cool-headed analysis.

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