The International Monetary Fund urged Japan on Saturday to promote banking and corporate restructuring "vigorously" and to clean up bad loans in its banking sector.
"In Japan, banking and corporate restructuring should be vigorously pursued, in particular addressing the issue of nonperforming loans," the IMF's International Monetary and Financial Committee said in a communique issued after a one-day meeting.
The IMFC, which guides IMF policy, consists of finance ministers and central bank governors from the United States, Japan and 22 other IMF member countries.
Japanese banks hold trillions of yen in nonperforming loans. This makes many banks reluctant to provide new loans, particularly to young companies. Some economists see the problem as a root cause for the decade of economic sluggishness in Japan.