TOKYO, Sept 30: In a surprise move that boosted hopes of a banking clean-up, Japanese Prime Minister Junichiro Koizumi on Monday tapped his pro-reform economics minister, Heizo Takenaka, to become the government’s top financial regulator.

Takenaka, who also retained his economics brief in a cabinet reshuffle, takes over the financial services portfolio from Hakuo Yanagisawa, who had been widely seen as an obstacle to aggressive government action to clean up Japan’s ailing banks.

Officially, the banks are saddled with about 52 trillion yen in non-performing loans, although some analysts have said the real figure could be more than triple that amount. Takenaka had clashed with Yanagisawa over the latter’s opposition to a controversial infusion of public funds to help banks clean up the massive bad loans that have cluttered their balance sheets for more than a decade, stalling economic growth.

It was the lack of confidence in Japan’s policies, born of such bickering, that Koizumi hoped to end with his appointment.

“It is a fact that, generally, there were concerns that the coordination was insufficient,” Koizumi told a news conference.

“So to erase such concerns, I made this personnel decision to demonstrate that the government, the Bank of Japan and the cabinet would join together to deal thoroughly with the bad loan problem.”

Koizumi said no policy options could be ruled out, but added that he would wait for specific proposals from Takenaka.

Speaking after his appointment was announced, Takenaka said Japan’s financial system was in a “severe state of malaise”, but he took a cautious line on how to cure it.—Reuters