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Tuesday, 22 October, 2002, 16:17 GMT 17:17 UK
Japan wavers over bank reforms
TV crew films outside Tokyo brokerage house
Markets fell on news of the delay

Japan's financial services agency has delayed the release of a crucial plan to clean up the country's troubled banks.

The scheduled announcement was cancelled after the proposals seemed to meet strong opposition from governing party politicians.

Economy Minister Heizo Takenaka
Takenaka is under pressure from his own party
The delay comes after Prime Minister Junichiro Koizumi signalled at the beginning of the month that he was finally getting serious about the bad-loan problem that is paralysing Japan's financial system.

He put the reformist economy minister in charge of cleaning up the banks, a highly contentious policy that is expected to lead to bankruptcies and rising unemployment.

Hard road ahead

For three weeks, the minister, Heizo Takenaka, has been drawing up his proposals.

But at the last moment, he cancelled the planned announcement, apparently due to political pressure.

It followed a meeting with senior members of the ruling Liberal Democratic Party, many of whom fear that reforms will lead to prolonged economic hardship.

Mr Takenaka has already alarmed the markets by warning that no bank or company is too big to fail.

The stock market hit a 19-year low in recent weeks in anticipation of a period of painful restructuring.

Watered down

Reformers want the banks to give a clearer picture of their bad loans, likely to be far higher than the $400bn already acknowledged.

They also want public money for the banks to enable them to write off the largest debtors, particularly in the troubled construction and retail sectors.

Some analysts believe Mr Takenaka's plans will have to be watered down in the face of the strong opposition.

The uncertainty looks set to continue as the prime minister's own commitment to reform is once again called into question.

 WATCH/LISTEN
 ON THIS STORY
The BBC's John Moylan reports from Japan
"At the heart of the malaise is Japan's banking system"

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