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Reports: Japan Offers Loan Plan

April 3, 2001

TOKYO (AP) _ Japan’s government is set to unveil an economic recovery plan that will include a two-year deadline for the country’s banks to dispose of their riskiest loans, news reports said Wednesday.

Banks will be given two years to write off 12.7 trillion yen ($101 billion) worth of loans that are clearly irrecoverable or are likely to go bad because the borrower is close to bankruptcy, the Nihon Keizai newspaper and other domestic news media reported.

The deadline is meant to force Japanese banks into cleaning up a bad-loan mess that has crippled the world’s second-largest economy since stock and property prices collapsed in the early 1990s.

Lenders in this country remain hesitant to liquidate collateral that has often shrunk dramatically in value, preferring to keep ailing borrowers alive with cheap credit.

The economic recovery plan will also feature provisions for a private fund that will buy up stock that banks have become desperate to get rid of, the reports said.

In Japan it has long been customary for banks and their corporate clients to hold each other’s shares as a symbol of their good relations.

But large portfolios have become a heavy drag on the finances of many lenders as the nation’s stock market recently slumped to its lowest level in 15 years.

The recovery plan was scheduled to be unveiled later Wednesday.

It was also expected to include an expansion of so-called safety-net measures for middle-aged workers who have lost their jobs as Japanese companies have come under pressure to downsize their work forces.

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