February 26, 2002	Tuesday	Zilhaj 13, 1422

TOKYO, Feb 25: Senior Japanese economic ministers failed on Monday to agree on new measures due out later this week to halt a slide in prices in Japan and breathe life into the struggling economy.

“We did not reach an agreement this morning in our discussion of anti-deflation measures, including a possible capital injection into banks,” Finance Minister Masajuro Shiokawa said in the parliament building.

“I argued the government should work out bold measures as part of its anti-deflation policy,” he said after talks with Cabinet Secretary Yasuo Fukuda, Minister of Financial Affairs Hakuo Yanagisawa and State Minister for Economic and Fiscal Policy Heizo Takenaka.

“But there were only vague discussions on the measures, from start to end, so we decided to hold another meeting on Wednesday morning before the government’s Council on Economic and Fiscal Policy starts in the evening.”

The key panel, chaired by Prime Minister Junichiro Koizumi, is due to unveil a plan to reverse falling prices on Wednesday, but time is fast running out.

Expected measures include forcing banks to write off more bad loans and encouraging the Bank of Japan to further ease monetary policy.

BoJ governor Masaru Hayami has indicated he would only consider further easing if Tokyo implemented structural reforms, but Shiokawa increased pressure on him to fall in line with the government’s wishes.

“The (BoJ) board meeting late this week may be a turning point for the government because the government will also release anti-deflation measures,” Shiokawa told AFP’s financial news subsidiary AFX-Asia earlier.

“The BoJ should take more concrete measures” Shiokawa said. “I hope it will discuss and decide on an increase in outright purchases of Japanese government bonds.”

This would have the effect of increasing the availability of funds in the financial system.

The central bank’s policy board will convene on Thursday for a one-day meeting.

Last week, Shiokawa urged the BoJ to raise monthly bond purchases to one trillion yen ($7.4 billion) from 800 billion yen.

Both the government and the central bank were united in their resolve to lift Japan out of its worst post-war recession, Cabinet Secretary Fukuda told a regular news conference earlier on Monday.

“We understand Hayami’s interest in the government’s efforts to dispose of bad loans,” Fukuda said when asked if the BoJ governor had set conditions for further monetary easing.

“The government is steadily dealing with the issue of bad loan disposals,” he said.

Analysts and market players hope the economic panel will discuss the possibility of a further injection of public funds into major Japanese banks to help them reduce a mountain of bad loans.

But Fukuda indicated such a move was unlikely to emerge this week.

“The government’s stance towards capital injection is unchanged. The government will not hesitate to take action if necessary after the special inspections of major banks (by the government’s Financial Services Agency),” he said.

The government’s financial watchdog is conducting a probe into banks’ bad loans. Results of the investigation are due to be published towards the end of next month.

Tension is mounting in the markets prior to the announcement, with investors holding out hope for radical policy action, analysts said.

“The initial impression was that the deflation package would contain little new, and even less of importance,” said ING Barings chief economist Richard Jerram.

“However, the government is clearly scrambling to try to make this more substantial,” he said.—AFP