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Japan Bank Chief Blames Bad Debts

October 26, 1998

TOKYO (AP) _ Japan’s prospects for economic recovery remain bleak, and bad debts at financial institutions threaten further harm to employment and income, Japan’s central bank chief said Monday.

Bank of Japan Gov. Masaru Hayami told a meeting of the central bank’s branch managers that an immediate return to economic growth in Japan is ``difficult.″

He said the mountain of bad loans at banks is stifling lending and causing companies to reduce investment, putting downward pressure on incomes and employment.

Hayami urged Japanese banks to take advantage of banking reform bills enacted last week that aim to pump funds into the financial system and open up credit lines to cash-starved companies.

``Through these measures, I expect that Japan’s financial system will be stabilized and strengthened, thereby contributing to the economic recovery,″ Hayami said.

Many banks, however, are reportedly reluctant to apply for government help because doing so could call public attention to their financial woes and expose past mismanagement to government scrutiny.

Japan’s banks are saddled with an estimated $1 trillion in bad debts left over from excessive lending during the 1980s.

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