PITTSBURGH (Kyodo) Finance Minister Hirohisa Fujii and U.S. Treasury Secretary Timothy Geithner agreed Thursday that domestic demand-led growth is good for the world economy and that the currency markets should not be manipulated, Fujii said.
“I told him that the new administration will make a shift to economic policies centered on domestic demand,” Fujii told reporters after their bilateral meeting in Pittsburgh. “That will also be a big plus for the world economy, not just for Japan.”
Fujii said Geithner showed “great empathy” for Japan’s recovery plans, which focus strongly on increasing disposable household income.
During the Group of 20 meeting in Pittsburgh on Thursday and Friday, Prime Minister Yukio Hatoyama is expected to also stress Tokyo’s commitment to stimulate the economy by boosting domestic demand, according to ruling party sources.
With the new government placing strong emphasis on cutting waste, there is some confusion at home and abroad over whether Japan’s stimulus efforts might be scaled down, the sources said.
During his meeting with Geithner, Fujii stressed that Japan’s direction is in line with U.S. economic policies, suggesting Tokyo’s continued interest in maintaining close ties with Washington both politically and economically, despite a change of government.
It was their first one-on-one meeting since Fujii became finance chief last week, following the Democratic Party of Japan’s landslide victory in the general election.
Fujii said that he also discussed currency issues with Geithner in the 30-minute meeting.
The DPJ heavyweight said he told Geithner he is against seeing any currency devalued “intentionally” and received a positive response.
“There are some countries tending to adopt policies to lower their own currencies,” but “in principle” Japan will not do so nor intervene in the currency markets, he said.
Fujii said exchange rates must be moved by the market.
After the meeting, Geithner said that Washington will do everything necessary to preserve the dollar’s role in global currency markets.
“A strong dollar is very important,” Geithner said before the two-day summit of the Group of 20 leading economies began in Pittsburgh.
In addition to macroeconomic and currency issues, Fujii said he told Geithner that Japan acknowledges the importance of a U.S.-led plan to require banks to have more and better quality capital.
However, the minister also said he expressed concerns about the proposal, saying toughening capital requirements “immediately” could make Japanese banks more reluctant to lend and choke off the nascent economic recovery.
On Thursday, Fujii also held bilateral talks with Australian finance chief Wayne Swan and South Korean Finance Minister Yoon Jeung Hyun, agreeing with the two to deepen ties to achieve sustainable growth, officials said.
The G20 consists of the Group of Seven major industrialized countries — Britain, Canada, France, Germany, Italy, Japan and the United States — and emerging heavyweights such as Brazil, China, India and Russia.
PITTSBURGH (Kyodo) Bureaucrats at the Finance Ministry on Thursday declined to give details of the first meeting between Finance Minister Hirohisa Fujii and U.S. counterpart Timothy Geithner, saying that Fujii himself fully explained the talks.
“What the finance minister told reporters is everything, so we will skip explanations,” said one of the officials, adding that the decision was made voluntarily.