The government has set a deadline of three years for banks to write the loans off. Koehler, who is in Tokyo for a two-day trip, said that recent economic indicators in Japan had been shaky, but added that he still believed the IMF's forecast for Japan to grow around 0.5 per cent in 2001 was attainable. The core problem is the lack of confidence.
Japanese citizens are insecure about the future.
He added that this situation would improve given the reform programmes set by new prime minister Junichiro Koizumi. A weaker yen would help Japan's powerful exporters by boosting the value of overseas sales, but Japanese authorities have stressed they would not drive the yen lower for the purpose of boosting the economy. Regarding the current dollar rate of around 120 yen, Koehler said it was not worrisome, without elaborating. He did point out, however, that deflationary pressure in Japan remained strong. However, deflationary forces remain entrenched and I would encourage the BoJ to implement the new framework forcefully.