Japanese economy stronger than before: Takenaka

Japan's economy is stronger than before, as evidenced by a decline in its massive non-performing loans, Economics and Financial Services Minister Heizo Takenaka said on Sunday.
"There are cyclical factors, but the underlying part is stronger," Takenaka said on a television programme, adding that the ratio of non-performing loans to banks' total loans had dropped sharply.
"Although there are problems at individual institutions, the financial system overall is healthier," he said.
Japan's economy grew a real annualised 5.6 percent in the January-March quarter, outstripping US growth of 4.4 percent in the same period.
Takenaka said banks needed to work to resolve problems with some large, troubled corporate borrowers, which could include the use of a state-backed turnaround body.
Asked about using the Industrial Revitalisation Corp of Japan (IRCJ) to revive troubled retailer Daiei Inc and others, Takenaka said that that was one option, but banks needed to talk with creditors.
The Nihon Keizai newspaper reported on Saturday that the banking group of UFJ Holdings Inc, the fourth-largest bank which reported a third straight year of losses last month, would soon start talks with the IRCJ to revive trading house Nissho Iwai-Nichimen Corp as well as major condominium developer Daikyo Inc.
Daiei is also a large borrower with UFJ.
On economic policy, Takenaka said in a Nikkei interview published on Saturday that the Bank of Japan (BOJ) should take monetary easing measures in line with the government's target of achieving two percent nominal growth in fiscal 2006/07.
"We know it is not directly the BOJ's target," he said. But he added: "we have confirmed that we have a co-operative stance with the BOJ in fighting deflation."
BOJ Governor Toshihiko Fukui has sought to distance the BOJ's monetary policy from the government's growth target, saying it was committed to fighting deflation but not to achieving a specific growth rate.
In minutes of a meeting in April of economic policy advisers to Prime Minister Junichiro Koizumi, Fukui said the BOJ would work closely with the government but would not held accountable for the government's target.
The central bank has vowed to stick to its hyper-easy monetary policy until annual changes in core consumer prices rise into positive territory on a sustained basis.
But as the economy recovers, debate is heating up as to how the BOJ would conduct monetary policy after that target is achieved, although most expect it would take another year before inflation materialised.