TOKYO, March 30: Prime Minister Junichiro Koizumi on Saturday urged the public not to panic over an imminent end to unlimited government-guaranteed repayments of deposits at collapsed banks.

There won’t be any problem if you keep your deposits at the existing banks, he said in an interview with the Japan Broadcasting Corp. We won’t allow any insecurity.

On Monday, the first day of the fiscal year 2002, the government will impose a 10 million-yen ceiling on deposit protection per saver per account at failing banks.

The government is to adopt the same limit on ordinary and checking-account deposits a year later.

The move was delayed by one year for fear it would prompt a flood of withdrawals from banks weakened by years of bad loans dating back to the “bubble economy” investment boom which burst in the early 1990’s.

According to the Bank of Japan, 25.9 trillion yen was withdrawn from time deposits of over 10 million yen at banks last year.

Despite the delay, 56 banks filed for bankruptcy over the past year as the government tightend checks on their financial health.

Koizumi admitted, The disposal of bad loans is a difficult question.

US credit rating agency Standard and Poor’s warned on Thursday that because of the limit to government guarantees, depositors would take more extensive credit protection measures, such as shortening deposit maturities or shifting funds to stronger banks.

The premier on Wednesday vowed to use public funds if necessary to help banks as Japan’s tightest budget in four years was enacted amid lingering fears of a financial meltdown.

We will take every possible measure if a critical situation arises, Koizumi said in the interview.

Banks have been particularly hit by a downslide in Japanese share prices in the past year which snowballed their unrealised losses.

But share prices have rallied in recent weeks after the government imposed curbs on short-selling a month earlier and began to revise its economic forecasts upward while corporations prepared to close their annual accounts.

On Friday, Finance Minister Masajuro Shiokawa criticised private analysts for having warned that a financial crisis would occur in March.

The March crisis is just an illusion created by commentators. We have a mind unmoved by what they say, he told a news conference.

In his interview, Koizumi hinted that in the future he might scrap his pledge to limit the issuance of new government bonds to 30 trillion yen per year to help the government reduce its huge deficits.

He said the limit had been necessary in order to maintain discipline in state finances.

Asked if the restriction would be considered when working out a state budget for the year starting in April 2003, the premier said: We want to think in a bold and flexible manner mindful of the situation.

We will have to be aware that the economy is moving.—AFP