Press Conference by the Minister for Financial Services

(Excerpt)

28 May, 2002

Q.

Bearing in mind the fact that the balance of non-performing loans (NPL) increased by 40% according to banks' accounts closed as of March 2002, could you please give us your current view on whether the NPL problem has passed its worst stage or not?

A.

In terms of losses from NPL disposal, the figure stood at 10.1 trillion yen at the end of FY1997 and 10.4 trillion yen at the end of FY1998, marking its peak. Although the figure came down to 4.5 trillion yen and down further to 4.3 trillion in subsequent fiscal years yen after passing the peak, thus approaching closer and closer to the proximity of net operating profit, it soared again to 7.7 trillion yen at the end of March 2002. According to banks, this increase took place in the process of the expected shrinkage of the figure to the vicinity of 2.5 trillion yen.

Since the figure peaked, we have also implemented an array of arrangements as deemed appropriate. Under the recent circumstances where certain industries have been faced with various changes to the environment that are becoming increasingly harsh, we newly inspected the matters relating to these changes on a real-time basis as well. The inspection attempt has certainly affected the recent turn of events.

That is basically why the figure ended up increasing to 7.7 trillion yen. Well, will anything else new come up in the future -- I would have to say that it is quite hard to predict what might happen in the days to come. Provided, however, that the economy as a whole should run on the right track as described in the ''Reform and Perspectives'' announced by the Cabinet Office, I would think that the first and second worst stages have already been passed and the third stage will be unlikely.