Prime Minister Junichiro Koizumi indicated Thursday that he does not support a proposal that the state-run Resolution and Collection Corp. buy bad loans at "effective book value" rather than at market value.

"I know there are a variety of proposals being put forward. But my basic stance is that such loans should be bought at market value. The law stipulates it must be done that way," Koizumi said.

Koizumi's remarks came after Chief Cabinet Secretary Yasuo Fukuda suggested earlier in the day he is in favor of studying the proposal as a possible means of accelerating bad-loan disposals in the banking sector.

Fukuda told a news conference: "We are now studying various proposals to help accelerate the disposal of the bad loans. (The proposed purchase of the loans at book value) is one of them."

The ruling coalition agreed earlier this week to study the proposal to buy the nonperforming loans at book values minus loan-loss reserves set aside by banks.

RCC initially floated the proposal last year, but discussion on the matter was shelved due to opposition from lawmakers claiming it would essentially mean banks' losses were being covered with public money.