Federal Reserve Chairman Alan Greenspan said Tuesday that Japan should move quickly to clean up the bad loans in its financial system, a Japanese Finance Ministry official said.

Greenspan made his remarks in a meeting with Finance Minister Hikaru Matsunaga in Tokyo, said a senior ministry official, who spoke on condition of anonymity."Resolution of the bad debt problem is very important," the official quoted Greenspan as telling Matsunaga.

Japanese banks are saddled with more than $546 billion in bad loans, making them reluctant to extend fresh loans and hampering the nation's economic recovery.

"Finally, getting the underlying land collateral off the books is (also) important," Greenspan was quoted as telling the finance minister.

Matsunaga explained to the Fed chairman Japan's plans to shore up its ailing financial system.

Japan's scheme, dubbed the "Total Plan," includes a panel to resolve disputes over ownership of bad debt collateral.

Matsunaga stressed that Japan's plans for financial system reform will continue under the new administration.