William McDonough, president of the U.S. Federal Reserve Bank of New York, said Tuesday he will support Japan's efforts to dispose of the nonperforming loans crippling the nation's banking sector, a Japanese official said.
At a meeting with Hakuo Yanagisawa, state minister in charge of financial affairs, McDonough said the plan will bring about a recovery in the real economy if the government is able to reconstruct ailing companies, rather than liquidate them, and dispose of its bad loans by promoting debt waivers as Yanagisawa intends to do, the official said.
McDonough was responding to Yanagisawa's explanations about Tokyo's bad-loan disposal plan, under which it aims to erase the bad loans within three years and reduce their outstanding balance to about 60 percent of the fiscal 2000 level by 2005.
McDonough reportedly said that while he understands there are many views about the bad-loan disposal strategy, the current plan is worth supporting.
Although the U.S. economy is decelerating, McDonough said that appropriate monetary and financial policies will prevent it from deteriorating further, according to the Japanese official.