Financial Services Minister Heizo Takenaka asked private-sector and government-affiliated lenders Monday to lend money to small and midsize firms to meet growing demand for funds as the yearend book-closing approaches.

At a meeting with representatives of banks and other lenders, Takenaka was quoted by government officials as saying, “I hope you consider smoothly extending the necessary loans to sound small and midsize companies.”

Senior officials of the Financial Services Agency told the representatives, including Masashi Teranishi, chairman of the Japanese Bankers Association, and other leaders of the banking sector, that some smaller firms have temporarily faced difficulty in raising funds under the prolonged deflationary trend, the FSA officials said.

Takenaka asked that the lenders not be reluctant to extend new loans and not forcibly collect loans using the FSA’s inspections as an excuse, according to the officials.

The FSA will start strictly assessing banks’ assets in the March 31 book-closings under a bank revival program unveiled in October to accelerate the disposal of bad loans that have burdened the nation’s financial system for more than a decade.

Some fear banks will become more reluctant to extend new loans to avoid deflating their capital adequacy ratios in the course of speeding up the bad-loan disposal.

The FSA has asked banks to extend more loans to smaller companies.

At the end of January, the financial regulator took administrative action against Mizuho Holdings Inc. as loans by its two core banks to small and midsize firms sharply dropped.

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