http://library.northernlight.com/EB20010406040000044.html?cb=0&dx=2006&sc=0#doc

Japan Unveils New Economic Plan

Author(s): YURI KAGEYAMA, AP Business Writer

Story Filed: Friday, April 06, 2001 9:23 AM EDT

TOKYO (AP) -- Worried about the nation's faltering economy, Japan unveiled an emergency package Friday that put a two-year deadline for major banks to dispose of their riskiest bad loans.

But the package was extremely short on key details -- how it will be carried out, how much public money will be needed and when other critical measures will be decided.

``It sets a direction, but it's hard to see much real progress,'' said Shuji Shirota, senior economist at Societe Generale Securities in Tokyo.

The nation's towering problem loans have been blamed for crimping Japan's economic growth for a decade.

The latest plan addresses 13 trillion yen ($104 billion) of the top banks' most dangerous loans, but the government estimates problem loans at all banks to be as high as 32 trillion yen ($256 billion).

A key part of the plan is setting up a system to buy up banks' stocks, whose falling prices are expected to further hurt their balance sheets because of the recent plunge in the Tokyo stock market.

Under an old system of cementing business ties, Japan's major banks own an unusually large amount of stocks by global standards -- about 38 trillion yen ($304 billion), or 1.5 times their combined capital of 24 trillion yen ($192 billion).

The plan also calls for a restriction on the amount of stock Japanese banks will be able to hold, but doesn't specify the ceiling or when that will be decided. It also fails to say how much public money will be used for the stock purchases, or where that money will come from.

The market appeared to welcome the announcement, but it was unclear how long the rally would last.

The Tokyo stock market recently fell to 16-year lows. The benchmark Nikkei Stock Average closed up 0.02 percent Friday.

Jun Saito of Japan's Cabinet Office defended the new plan as showing the government meant business this time, marking a move away ``from an economy dragged by non-performing loans.''

``Unless we address this issue, we cannot have a bright prospect in terms of economic growth,'' Saito told reporters.

The government has a good way of monitoring whether the banks were writing off the bad loans according to deadline, officials said.

Some laws related to the plan still need approval from Parliament. Finance officials said they hoped to firm up the details soon, possibly in the next six months.

The economic package is being tackled at a time when Japan's political world is in transition. The unpopular Prime Minister Yoshiro Mori, who has done little to help turn around the economy, told his Cabinet on Friday that he would step down.

A new prime minister is expected to be chosen by the end of the month, but whether any of the names being tossed around will have a clear strategy to bring life back into the world's second largest economy remains dubious.

Under Friday's plan, the government will push projects that revitalize urban areas, partly to battle the recent plunge in land prices which has hurt banks' collateral. It will study tax breaks to encourage stock trading and land transactions.

The government also promised to improve unemployment benefits. The cleaning up of the bad loans is expected to force companies to trim their work force or even go bankrupt.

Japan, which has long boasted relatively low unemployment, is battling surging jobless rates, at 4.7 percent in February. It was at a record 4.9 percent in January.

Economy Minister Tao Aso warned that unemployment and bankruptcies may rise. ``It will be very painful,'' he said.

Copyright © 2001 Associated Press Information Services, all rights reserved.

-- Anonymous, April 06, 2001