Several Japanese banks are still suffering sizable bad loans, "but overall situations have changed," Takenaka said in a television interview. "Japan is now facing the last hurdle of bad loan disposal."

Last month, three of Japan's biggest banks, including Mizuho Financial Group, reported spectacular returns to profit in the year to March after they aggressively tackled the problem.

But UFJ Holdings Inc., still under pressure, announced a net loss of 402.8 billion yen (3.6 billion dollars) in sharp contrast to a profit of 78 billion yen it projected in April.

In the interview, Takenaka said UFJ could even speed up bad loan disposal by asking for the cooperation of the Industrial Revitalization Corp. of Japan, a government body designed to help troubled companies.

"It is important to use the Industrial Revitalization Corp. of Japan," Takenaka said.

The Asahi Shimbun said Sunday UFJ began considering asking the government body to help prompt its large borrowers such as Daikyo Inc., Nissho Iwai-Nichimen Holdings Corp. and Daiei Inc. to lower loans.