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Koizumi: Public works excesses over
Staff and wires
TOKYO, Japan -- Japanese Prime Minister Junichiro Koizumi has rejected calls for extra public works projects, saying the time for excessive spending of taxpayer funds is over. Koizumi is battling a weakening economy and a share market that has slipped this week to its lowest level in 19 years on fears about bad debts in the banking system. "There have been calls for more fiscal spending and an increase in public works, and demands that an extra budget be compiled," Koizumi told reporters as he ended a visit to the Tokyo Stock Exchange on Friday. He said the time was over when the government could indulge in excessive spending of tax money on public works projects. But Koizumi said that he still believed Japan's economic potential was strong. Finance Minister Masajuro Shiokawa said Friday Koizumi had encouraged him to set up a safety net for small companies at risk of going broke. That could include guarantees on loans and steps to boost jobs. Tankan resultEarlier this week one of Japan's key economic indicators suggested that recovery is far from confirmed. The closely watched Tankan survey showed business sentiment improved in the September quarter, but the gain fell short of expectations. The quarterly survey, released Tuesday by the Bank of Japan, showed the big manufacturers' diffusion index improved to minus 14 from minus 18 in June. The four-point gain contrasted with a 20-point improvement in the June quarter. (Full story) After four quarters of contraction, the economy grew by 0.5 percent in the June quarter. But as Japan struggles to consolidate its tentative recovery, a host of negative factors are weighing on it. These include a possible spike in oil prices from a war in Iraq, slower export growth because of the U.S. slowdown -- exacerbated by this week's West Coast ports shutdown -- and worries about the mountain of bad debts afflicting Japanese banks. As part of a cabinet reshuffle on Monday, Koizumi dumped Financial Services Minister Hakuo Yanagisawa, one of the most vocal opponents of using public funds to save the banking sector. (Full story) Bank task force
He replaced him with Economy Minister Heizo Takenaka, who has since set up a special bank task force that will report to him within two weeks on possible measures to dispose of the banks' bad loans. The big four banks have taken a battering on the markets this week, with Mizuho Holdings and UFJ Holdings both plunging 15 percent on Thursday. They were again down on Friday, UFJ losing another 5 percent to reach a record low of 218,000 yen. Sumitomo Mitsui Banking Corp lost 4.5 percent, but Mitsubishi Tokyo Financial Group -- regarded as the strongest of the four -- put on 1.2 percent. Tokyo stocks generally edged up in afternoon trade Friday as investors focused on blue chips such as NTT DoCoMo, which closed 10.8 percent higher at 235,000 yen. The key Nikkei 225 average struggled back 1 percent to 9027.55 after closing below the 9000 mark for the first time in 19 years on Thursday. Reuters contributed to this report.
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