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Finance Minister Masajuro Shiokawa promised Friday to quicken the cleanup of bad loans at Japan’s banks, while the Group of Seven major economies agreed to cooperate to prevent downward risks from derailing a shaky global recovery.

Major points of G7 statement
The following is the gist of a statement issued by the finance ministers and central bank governors of the Group of Seven industrial nations after their meeting in Washington on Friday.

* Economic growth in G7 countries is continuing, though at a more moderate pace.

* Risks to recovery remain.

* G7 countries are committed to sound economic policies and structural reforms.

* The G7 will continue to monitor exchange markets closely and to cooperate appropriately.

* G7 countries are ready to support Argentina through the International Monetary Fund.

* G7 countries reaffirm their strong commitment to fighting terrorist financing.

Shiokawa indicated at a news conference following the G7 talks that Japan is ready to inject public funds into banks to accelerate the disposal of nonperforming loans. Some analysts consider this essential to solving the nation’s bad loan problems.

“I think it is important to accelerate the disposal (of bad loans) while making it clear that borrowers that cannot revive or cannot meet the needs of the times should withdraw,” Shiokawa told the news conference. “If, as a result of that, capital becomes insufficient (at certain banks), I think public funds should be injected.”

But confusion ensued over whether Shiokawa promised to use public funds during his talks with U.S. Treasury Secretary Paul O’Neill, which was held prior to the G7 conference.

The finance chiefs from the world’s richest countries said in a joint statement after their one-day meeting in Washington that economic growth in the G7 countries “is continuing, though at a more moderate pace than earlier this year.”

But finance officials from Britain, Canada, France, Germany, Italy, Japan and the United States acknowledged the downside risks, apparently referring to a global stock plunge, fears of a war against Iraq and economic turmoil in Latin America.

“We are committed to sound economic policies and structural reforms, and to working together to improve corporate disclosure, enhance corporate accountability, and strengthen the independence of auditing,” the statement said.

The G7 nations reaffirmed their stance on currency rates, vowing to “continue to monitor exchange markets closely and cooperate as appropriate.”

They refrained from touching on exchange levels, suggesting the nations are tolerant of the status quo.

The statement painted a more bleak picture of the global economy than when they last met, in June in Halifax, Canada. At that meeting they said growth in their economies had “strengthened and should continue to consolidate throughout the year.”

Since then, uncertainty has increased over the U.S. economy — the engine of world growth in recent years — as plunging stock prices threaten to take a toll on consumer confidence, and businesses hold back on investment.

The outlook for the European economy also appears uncertain. The German economy, with its high unemployment rate, is of particular concern.

Japan is showing signs of improvement, though the sustainability of that recovery is in doubt.

Shiokawa and Bank of Japan Gov. Masaru Hayami said they briefed their counterparts on Japan’s efforts to lift the economy out of its decade-long doldrums.

Hayami said there was “high interest” in the BOJ’s plan to buy shares directly from commercial banks to help stabilize the banking system.

The central banker said the top G7 finance officials supported in principle the basic idea behind the BOJ’s plan in their meeting, quoting one official as describing it as “ambitious and creative.”

The BOJ jolted markets Sept. 18 when it announced the controversial measure, which it says is intended to protect banks from the fall in stock prices that threatens their balance sheets.

Shiokawa, meanwhile, said he had told his G7 counterparts that Japan will accelerate efforts to take bad loans off banks’ balance sheets and that work is continuing to resolve the issue by fiscal 2004, as promised.

But he flip-flopped over the question of whether he told O’Neill in a meeting held shortly before the G7 meeting that Japan was ready to inject public funds into banks if necessary.

Shiokawa first said the issue was not mentioned in the talks. He told a news conference later in the day, however, that the funds should be used for banks whose capital bases are depleted due to the aggressive disposal of nonperforming loans.

Senior ministry officials later told reporters that Shiokawa wanted to correct his remarks to say that the public funds were not mentioned at all in the talks.

The officials said Shiokawa simply reiterated his view on the injection of public funds during the news conference, in addition to explaining what he told O’Neill.

In the news conference, Shiokawa also said he told O’Neill that he believes there are too many banks in Japan and that their number should be reduced. In the process of doing so, reforms should be implemented, possibly by using public funds, he said.

The use of public funds to bail out Japan’s banks is a sensitive issue that could be the focus of policy-squabbling at home before details of any such action are mapped out.

Scandals considered

WASHINGTON (Kyodo) The top financial officials from the Group of Seven industrialized nations called on Friday for enhanced corporate governance. They addressed the issue in a statement for the first time in the wake of a series of corporate scandals in Japan and the United States.

“We are committed to . . . working together to improve corporate disclosure, enhance corporate accountability and strengthen the independence of auditing,” the G7 finance ministers and central bank governors said in the statement after their one-day meeting in Washington.

The G7 officials turned to the issue of corporate governance given the spate of accounting and related scandals at leading U.S. corporations.

Scandals at companies such as energy trader Enron Corp. and telecom operator WorldCom Inc. have shaken confidence in corporate America, depressing not only U.S. stocks but bourses worldwide.

Japan has also been rocked by a wave of recent corporate scandals, including Tokyo Electric Power Co.’s coverups of defects at nuclear reactors, Nippon Meat Packers Inc.’s abuse of a government plan designed to deal with cases of mad cow disease and the arrest of employees of trader Mitsui & Co. on charges of interfering in bidding for a government-funded project.

But the G7 officials said in the statement, “We are confident that these policies, accompanied by continued vigilance and cooperation, will strengthen growth in coming months (in their economies).”

Earlier Friday, finance ministers from 24 developing countries called on the U.S. to take measures to improve corporate governance to restore investor confidence, expressing worries about recent volatility in global financial markets.

“The continued decline in global equity markets and the fragility of investor confidence in international capital markets have tightened financing conditions in emerging markets and intensified the risks of a worldwide credit crunch,” they said.

The ministers from the so-called Group of 24 countries called for “prompt and decisive actions in the U.S., including through the effective implementation and enforcement of corporate governance legislation, to restore investor confidence.”

The G24 comprises eight developing countries each from Africa, Asia and Latin America, including Brazil, Egypt, India, Mexico, Nigeria, the Philippines, South Africa and Venezuela.


Major points of G7 statement

The following is the gist of a statement issued by the finance ministers and central bank governors of the Group of Seven industrial nations after their meeting in Washington on Friday.

* Economic growth in G7 countries is continuing, though at a more moderate pace.

* Risks to recovery remain.

* G7 countries are committed to sound economic policies and structural reforms.

* The G7 will continue to monitor exchange markets closely and to cooperate appropriately.

* G7 countries are ready to support Argentina through the International Monetary Fund.

* G7 countries reaffirm their strong commitment to fighting terrorist financing.

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