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Prime Minister Junichiro Koizumi met with key Cabinet ministers Sunday afternoon to discuss the possibility of formulating new measures to boost the disposal of nonperforming loans held by financial institutions.

The meeting, at a Tokyo hotel, came after Koizumi told U.S. President George W. Bush during a meeting in New York on Thursday that he would “accelerate the disposal of nonperforming loans to get (economic structural) reforms rolling.”

On Sunday, the prime minister met with Financial Services Minister Hakuo Yanagisawa, Heizo Takenaka — minister in charge of economic and fiscal policy — and other ministers to hear their views on the bad loans issue.

Koizumi told reporters after the gathering that he instructed Yanagisawa to swiftly come up with specific steps to deal with the matter.

Sources close to the talks said that Yanagisawa explained the proposals currently being discussed within the Financial Services Agency, such as the urging of major banks to speed up efforts so that the most troublesome of their bad loans could be disposed of within one year.

Meanwhile, Takenaka said that comprehensive measures were needed. He suggested once again recapitalizing financial institutions with public funds, the sources said.

The prime minister is expected to unveil a “Koizumi Vision” that outlines new steps for economic structural reform as early as Thursday. Sources said the stabilization of the financial system to curb deflation will be a main pillar of the plan.

Although Takenaka and Bank of Japan Gov. Masaru Hayami are calling for a “pre-emptive” recapitalization of banks with public money, the FSA maintains that such a step is unnecessary at this time.

Many observers, however, say that any additional measures without teeth would be shunned by market players and would pull stock prices lower.

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