Financial Services Minister Hakuo Yanagisawa on Friday rejected a proposal by Finance Minister Masajuro Shiokawa for the state-run Resolution and Collection Corp. to buy bad loans from banks at higher-than-market value.

“That cannot be acceptable, as it involves many difficulties,” Yanagisawa told a regular news conference.

Shiokawa’s proposal, made earlier this week, attaches the condition that the government be allowed to tap the pool of deposit insurance premiums collected from banks in order to cover half the losses to be incurred by RCC as a result of the proposed step.

“Deposit insurance premiums should not be a source of funds for covering losses,” Yanagisawa said.

RCC could take losses on bad loans it buys if the prices at which it sells the loans later on the market are lower than its own purchase prices.

Shiokawa made the proposal at Monday’s meeting of the Council on Economic and Fiscal Policy.

Referring to Prime Minister Junichiro Koizumi’s pledge to U.S. President George W. Bush in New York that Japan will increase efforts to resolve its nonperforming-loan problem, Yanagisawa said Japan will not devise a fresh policy plan to dispose of bad loans at private banks but will step up efforts to quickly implement the measures included in the current program.

“As we have decided on a time frame to accelerate (the disposal of bad loans), I took it (Koizumi’s pledge) as meaning that we will proceed at a slightly faster pace,” Yanagisawa said.

Under the current plan, the Financial Services Agency is encouraging banks to clear 50 percent of newly emerged bad loans within a year and 80 percent within two years.

“We will work on the timetable . . . more promptly,” Yanagisawa said, suggesting the FSA will focus on reaching its goals within the current plan.

In New York, Koizumi told reporters after the meeting, “Reconstructing the economy is the most important task for the Koizumi administration, I told President Bush that I will accelerate the disposal of nonperforming loans to get (economic structural) reforms rolling.”

Bush told him to steadily carry out such efforts, according to Koizumi.

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