NEW YORK Japan, defying deep scepticism over its reform program at a global financial meeting, promised Friday to return the economy to two percent growth in about two years.

Haruhiko Kuroda, vice finance minister for international affairs, found himself under the spotlight at the World Economic Forum over his country's 11-year economic stagnation.

Confidence in Japan's determination to reform the recession-bound economy took a hit this week when Prime Minister Junichiro Koizumi sacked his popular and pro-reform foreign minister, Makiko Tanaka.

But Kuroda said the reforms could be completed soon.

"I think perhaps the adjustment period could take a few years, one year or two years," he said, before returning to full potential growth of about two percent a year.

Fred Bergsten, director of the Washington-based Institute for International Economics, said a completion of Japanese reforms could unleash growth rates of two-three percent for several years.

But "I do not see the structural reforms being made," Bergsten told a joint news conference with Kuroda.

"In the absense of those reforms, particularly in the banking system, i fear it gets worse," he added.

Later, speaking to a small group of reporters, Kuroda said Bergsten's comment may have been "somewhat extreme".

"I do not think the reform has not been implemented. That is not true. Some of the reforms have already been implemented and many more have already been decided and also some issues are going to be decided in the coming months," he said.

"What I would like to emphasise is that substantial progress has been made in the structural reform but ... the effect on the economy, the fruit of reform, would take time to be felt in the economy."

Economic reforms in the United States and Britain had taken years to feed through to economic performance, AFP quoted Kuroda as saying.

Reforms had already been implemented in the Japanese industrial sector, he added.

In the banking sector, the disposition of bad loans was well underway, Kuroda added, conceding however that new non-performing loans had since appeared on the books "so the non performing loan ratio has not declined so significantly as we hoped for".

The most formidable reform task lay in shoring up the government coffers, he said, noting that Japan had a public deficit of about six percent of gross domestic product.

"It would take years to eliminate such a big government deficit but we have already started to consolidate our position," Kuroda said.

In any case, the senior official said, Japan's impact on the global economy should not be blown out of proportion.

"I think you should have a balanced view. The Japanese economy is certainly big but it is about one half of the U.S. economy and one third of the EU (European Union) economy as a whole," Kuroda said.

"Japanese economic output is important but other economies are more important," he added.

"Certainly the Japanese economy was discussed at the meeting here and I think most of them, including me, think that a strong recovery of the Japanese economy would be good for the world economy."

On the domestic front, Kuroda said the Bank of Japan had made a "big effort" to help the economy. "But of course it is possible that further measures might be called for in the coming months."

The plunge of the Japanese yen to a three-and-a-half year low against the dollar this week was excessive, he said.

"We always carefully monitor the market development and whenever market movements are excessive we could and we would take any necessary measures," Kuroda told reporters.

Asked what would be classed as excessive, he said: "It all depends on the circumstances but certainly yesterday's move was excessive."