Finance Minister Kiichi Miyazawa on Wednesday admitted that the ministry's bank inspections were opaque and ineffective.

"Inspections came to deserve the name only after the Financial Supervisory Agency conducted them," Miyazawa told a regular news conference, commenting on the first anniversary of the agency's debut.

The FSA began operations on June 22, 1998, to take over the watchdog function — and many officials — of the Finance Ministry. The ministry had been increasingly criticized for its arbitrary administration, which culminated in bribery cases involving major banks.

The ministry has long maintained strong control over the financial industry, establishing the "convoy system," in which the weakest institutions were protected from competition.

Miyazawa, 79, worked as a bureaucrat at the ministry in his younger days and as an elected politician has served as finance minister twice: 1986 to 1988 and since last July. "I think (the FSA) has done a very good job" in the past year, he said firmly.

He said the agency's ongoing inspections, which have already covered 19 major banks and 64 first-tier regional banks, are based on international standards and are transparent. He said that has not only enabled fair, fact-based discussions with banks but also helped promote the cleanup of bad loans by banks in a transparent manner, which has helped Japan's financial system regain international confidence.

Earlier in the day, Financial Reconstruction Minister Hakuo Yanagisawa also praised the FSA and its achievements, pointing out the irony that the agency's officials are mostly from the Finance Ministry. "They are the same people," Yanagisawa said in a Tokyo speech. "They are working completely differently from the way they did at the Finance Ministry."