Vice minister tips steady fightback for Japan

Japan's stock market surges, anticipating the government will help out banks

HONG KONG, China (CNN) -- Vice finance minister Haruhiko Kuroda expects Japan's economy to recover slowly and steadily.

Japan on Monday passed a $670 billion budget reflecting the first cut in six years. The budget envisages 4.5 trillion yen deficit cut, nearly 1% of total GDP.

It coincides with the Bank of Japan's announcement of an interest rate cut and the government's decision to spend $583 million to bail out two Japanese banks.

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Speaking to CNN on Monday, Kuroda said the calendar year just ended that showed 1.7 percent growth is "not so bad". He thinks the Japanese economy could continue to recover slowly but steadily, regardless of government spending.

Japan's Nikkei index surged more than 3 percent Monday afternoon, with the market expecting the government to help banks to clear their bad loans.

Kuroda believes banks have enough provision against their potential loss. Their balance sheets are more sound than some years ago. The government encourages banks to write off or sell off their non-performing assets.

But the bad performance of banks is also a result of bad liabilities of the corporate sector. Kuroda urged corporate to accelerate their restructuring.

The finance services agency has started liaising with ministries responsible for various private sectors that have large amount of bad debts, for instance, the construction and real-estate sectors.

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