The Japanese economy probably grew almost 3 percent in the fiscal year ended on March 31, beating the government's estimate, Economy and Financial Services Minister Heizo Takenaka said.

　　Japan's gross domestic product growth rate in the fiscal year "significantly exceeded the government's projection of an annual rate of 2 percent," Takenaka said in TV Asahi's Sunday Project program. It's "possible" the economy expanded at about 3 percent in the period, he said.

　　The country's banks are making progress toward cleaning up bad loans, helping revive growth in the economy, Takenaka said. The government's "structural reform" program is also overhauling the economy to improve the financial and social security systems to ensure a sustainable recovery, he added.

　　Japan's economy, the world's second-largest, expanded at an annualized 6.4 percent in the quarter ended on December 31, fueled by rising global demand for digital cameras and other exports from Japan. That's the fastest since 1990 and marks a seventh quarter of expansion, the longest run of growth since the nine quarters ended on March 1997. The government is scheduled to release its quarterly GDP report next month.

　　The Bank of Japan's Tankan survey of business sentiment last week showed companies in the service industry became optimistic for the first time in seven years. A revival in consumer spending is boosting sales at retailers, helping sustain a recovery from Japan's third recession since 1991.

　　Mizuho Financial Group Inc, the nation's largest bank, said it had 3.72 trillion yen (US$35.7 billion) of bad debt at the end of December, a third less than at the end of September 2002. The Tokyo-based lender sold 1 trillion yen of shares to customers in 2003 to help pay for bad-loan write-offs.

　　Sumitomo Mitsui Financial Group Inc, Japan's third-largest bank, shed 14.1 percent of its bad debt in the December quarter. The Tokyo-based bank sold 495 billion yen of shares in 2003 to investors such as Goldman Sachs Group Inc and formed a venture with the US investment bank to tackle bad loans.

　　The country's overall economic strategy is also changing, as Japan seeks to open its domestic market wider to foreign companies in order to find a way for Japanese companies to enter other countries' markets.

　　Before a pact with Mexico last month, Japan had signed just one trade agreement, with Singapore in 2001. But by year's end it hopes to wrap up talks with more countries like Thailand, Malaysia, and the Philippines.

　　It also wants a trade deal with South Korea in 2005 and has begun negotiating with Indonesia.

　　After years of sparring between farmers who want to keep cheap foreign produce out and industrialists eager to export more, free traders appear to be gaining the upper hand in a country with a long history of erecting walls around its markets.

　　Few expect the haggling over how open Japan will be to Thai rice or South Korean beef to be easy. Japan is home to 2-million-plus politically influential farmers keen on protecting their livelihoods.

　　(Bloomberg/AP)