Transcript: CNN interview with Kuroda

CNN's Dalton Tanonaka interviews Haruhiko Kuroda, vice minister for International Affairs with Japan's Finance Ministry.

TANONAKA: Recent moves by the Bank of Japan, and hopes for a government push to tackle the problem of massive bad bank loans, are raising a pulse in a lifeless Japanese economy. The goal is to meet a gross domestic product growth target of 1.7 per cent in the new fiscal year.

Minister Kuroda, the budget passed today, the overall 670 billion dollars, reflects the first cut in six years. In what ways is it designed to help reducing the industrialized world's worst debt burden ?

KURODA: You just mentioned, the fiscal budget of 2001 envisages 4.5 trillion yen deficit cut, nearly one percent of total GDP. So, certainly the new budget intended to reduce fiscal deficit. But the whole set of fiscal consolidation must wait until the economy is strengthened, until the economy recovery is formally established.

TANONAKA: Already Economics Minister Aso and your boss Minister Miyazawa are saying that there will be no need for a supplementary budget to help the economy. Leaders have said that before, then out comes emergency spending. And it doesn't seem to help.

KURODA: you mentioned the fiscal year 2001 economic forecast is 1.7 percent growth. In calendar year 2001 just ended showed 1.7 percent growth which is not so bad. We hope and we think the Japanese economy could continue to recover of course rather slowly, but steadily.

TANONAKA: So more money added is not the answer, that's my point.

KURODA: That's right. You may be correct. In any case the economy could continue to recover . . .

TANONAKA: Despite the money or lack of money ?

KURODA: That's right.

TANONAKA: Let's get to what apparently helped the NIKKEI to a very strong day today -- anticipated government plans to help banks clear their books of bad loans. What's going to be the focal point of the plan ? What is it going to do?

KURODA: I must day that Japanese banks have appropriate sort of provision against potential loss, so their balance sheet are much more sound than for instance, a few years ago. The problem is that until and unless the bad loans and bad assets eliminated from the balance sheet, the final solution is not yet made.

So now the government is encouraging Japan's banks to write off or sell off those bad assets . . . By so doing eliminate the bad assets from their balance sheet.

TANONAKA: Besides the government saying please do it, what can the government do to help banks ?

KURODA: One way is to make the corporate to accelerate their restructuring. Another side of bad asset of the banking sector is corporate sector's bad liabilities. So, in order to solve the problem, the corporate restructuring is absolutely necessary so that (it helps) financial services agency (that) has already started consultation with ministries which are in charge of construction sectors, real-estate sector, those sectors which have very large amount of bad debt, bad liabilities.

TANONAKA: Haruhiko Kuroda, Japan's vice finance Minister for International Affairs, thank you very much for coming in.