G-7 Urges Japan To Revive Economy
TOKYO (AP) _ Finance officials from the world’s top industrialized nations urged Japan today to revive its hobbled economy and fix its troubled financial system _ for its own good and for the region’s recovery.
Japan must restore its banking system to health, achieve domestic demand-led growth, and open and deregulate its markets, deputy finance ministers from the Group of Seven nations and Asian countries said in a statement after today’s meetings.
``The restructuring and revitalization of the Japanese economy and financial system is urgently needed,″ the statement said.
The officials had been expected to agree to coordinate efforts to stabilize Asian currencies and to re-emphasize the importance of shoring up the yen’s value against the dollar.
``We want to regain trust at home and abroad by moving quickly and decisively to clean up the bad loans,″ Japanese Finance Minister Hikaru Matsunaga was quoted by Kyodo News agency as saying before the meeting.
The Clinton administration has made it clear that interventions like one earlier this week to shore up the yen can only do so much _ and that the situation may worsen again quickly without long-term action by Japan.
Clinton said Friday he had told Japanese leaders ``that no short-term efforts would work unless there was a serious long-term, very comprehensive commitment to economic reform.″
Earlier this week, the United States and Japan made a sudden joint foray into world currency markets after the Japanese currency fell Wednesday to its lowest level against the dollar in eight years. The yen-buying action pushed the dollar down 7 yen in a mere three days.
The yen’s slide had raised fears that Asian countries may be forced to engage in another round of competitive devaluations, triggering a repeat of last year’s disastrous free fall in regional currencies.
On Friday, U.S. Deputy Treasury Secretary Lawrence Summers concluded a series of high-level meetings with Japanese government officials and extracted promises that Japan will take swift action to boost its ailing economy.
Summers and Matsunaga vowed to intervene again in currency markets to stabilize the yen if necessary.
Finance officials praised China’s role in containing Asia’s financial crisis by not devaluing its currency, the yuan, also known as the renminbi, despite losing export market share.
The officials also cited Thailand and South Korea for taking bold, painful steps to fix their financial problems, and welcomed Indonesia’s ``renewed commitment″ to economic and political reform.
Today’s meeting was being watched closely for signs of just how serious Japan will be in its efforts at the longer-term structural reforms most experts agree it badly needs.
Japan has said it will implement a program to clean up the bad loans at the nation’s banks and put together a package of tax cuts aimed at boosting the economy. Prime Minister Ryutaro Hashimoto reportedly has decided to slash corporate taxes and announce a permanent income tax cut before elections for the upper house of Parliament on July 12.
Matsunaga promised the gathering that the ruling Liberal Democratic Party will put together a plan to deal with the banking system’s bad loan problem when it meets June 23.
Analysts have said Japan needs to commit more public money to help rid its banks of $563 billion left on their books from the collapse of the property market in 1992. They also have urged the country to stop coddling banks with regulations _ even if that means letting weaker ones go under.