Chief Cabinet Secretary Yasuo Fukuda said Thursday the government is studying “every possible step” that would help banks accelerate bad-loan disposal — an indication the government is thinking of injecting them with a fresh tranche of public funds to avert a potential crisis.

“We are taking everything into consideration,” the top government spokesman said.

Fukuda said the Financial Services Agency is preparing steps to fulfill Prime Minister Junichiro Koizumi’s vow to accelerate the disposal of problem loans, adding that more concrete measures will be announced in October.

Later in the day, Koizumi cautiously underscored his resolve to tackle the problem.

“We are determined to accelerate bad-loan disposal,” Koizumi told reporters at his official residence. “I should not say anything more because now is a delicate time.”

Calls to recapitalize the banks with public funds are mounting within the government and the ruling coalition parties because bad loans are now mounting faster than the banks can write them off.

In this regard, Finance Minister Masajuro Shiokawa on Wednesday expressed support for a public fund injection on condition that such a step would encourage banks to weed out zombie companies.

Meanwhile, pressure has been mounting within the ruling coalition for Koizumi to replace Financial Services Minister Hakuo Yanagisawa when the Cabinet reshuffle gets under way next week. Yanagisawa is against another public fund injection.

Banks have received injections of public funds in 1998 and 1999.

During a meeting with Koizumi in the afternoon, Takeshi Noda, head of the New Conservative Party, reportedly urged the prime minister to “clearly demonstrate his economic policy through the Cabinet reshuffle,” suggesting he should replace Yanagisawa to show the government’s resolve on the bad-loan issue.

In talks with Noda and New Komeito leader Takenori Kanzaki at his official residence, Koizumi discussed plans for the upcoming extraordinary Diet session. The NCP and New Komeito are the junior partners in the coalition, which is led by Koizumi’s Liberal Democratic Party.

The three formally agreed the extra Diet session should open on Oct. 18 and run for 57 days.

Regarding the LDP’s executive posts, LDP Secretary General Taku Yamasaki told reporters that Koizumi would make his decisions Friday.

Yamasaki indicated that he and the two other top executives, Taro Aso, chairman of the party’s Policy Affairs Research Council, and Mitsuo Horiuchi, head of the Executive Council, would be reappointed.

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