TOKYO Prime Minister Junichiro Koizumi said Wednesday his government would call on Japanese banks to introduce strict assessment of bad loans as part of his effort to fight the nation's bad debt woes.

"It has been said banks have disposed of (bad loans) appropriately, but some people say their assessment is loose," Koizumi said in his first question and answer session with opposition leaders in parliament since he took office on April 26.

"We have to take action after humbly listening to such an opinion," the Japanese premier said.

"We will aim at final disposal of bad loans in two to three years," Koizumi said. "This is one of my most important tasks, right now."

Last week, Financial Services Minister Hakuo Yanagisawa said the level of new bad loans held by Japan's banks was higher than expected, AFP reported.

"Final disposal progressed, but we still had new bad loans," Yanagisawa said. "I thought the amount of bad loans would be lower."

According to internal calculations by the government's Financial Services Agency (FSA) the level of bad loans held by Japan's 16 major banks stood at 11.6 trillion yen ($96.7 billion) at the end of March, down from 12.7 trillion yen last September.

But according to financial records disclosed by major lenders the level of new bad loans rose by 3.4 trillion yen in the six months to March.

The level of bad loans in Japan's banking sector has been on the increase due to the sagging Japanese economy.

But analysts also said the increase was partially due to banks' lax assessment of bad loans.

In April the government announced an emergency economic package aimed at restoring health to banks and putting Japan back on a path of sustained growth.

Under the plan the banks have two years to dispose of the bad loans on their books.