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Prime Minister Junichiro Koizumi on Monday defended the government’s plan to try to revive insolvent companies that are cut off by their banks amid growing criticism it is attempting to interfere in private sector affairs.

“There are jobs the government must handle when the private sector’s function is weak,” Koizumi told a House of Representatives panel on issues related to public corporations. “It is necessary for the government to intervene to a certain extent.”

Koizumi was referring to the government’s plan to set up a new entity to deal with companies whose financing may be cut off in the course of bank-sector reform. The plan is part of an “industry reconstruction” plan contained in the economic package the government released last month to accelerate the disposal of bad loans at banks and combat deflation.

The package is expected to boost bankruptcies and thus unemployment, but the new body, due to be set up next year, is expected to cushion the shock by providing financial aid to firms it deems “viable.”

Koizumi said in the parliamentary session that the envisaged new entity may be led by private-sector personnel.

The government’s top spokesman, Chief Cabinet Secretary Yasuo Fukuda, said at a press conference that the entity would be a private company.

“We would like to make use of the intentions of the private sector as much as possible” when proceeding with the program, Fukuda said.

Economy, Trade and Industry Vice Minister Seiji Murata told a separate news conference that he expects the entity will allow bailouts on a case-by-case basis, rather than uniformly according to numerical criteria.

“It is possible that (criteria) will be set on the outline, such as a common criterion in general terms and (other) criteria for such roughly defined industries as the general construction, service and manufacturing sectors,” Murata said.

“But looking at the reality of corporate reconstruction, it will be inevitable to make judgments case by case, and this is rather an important part” of the program instead of setting criteria, the industry ministry’s top bureaucrat said.

On Tuesday, the government will open the strategic headquarters for industrial revival and employment measures, to be headed by Koizumi. Among the tasks will be the drafting of guidelines that the planned entity will follow in buying banks’ claims on loans to insolvent companies it decides to bail out.

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