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Washington will step up pressure on Tokyo to alter its austere fiscal policy to stimulate domestic demand if the economy here proves to have fallen into recession next month, a policy adviser to the Democratic Party said Sept. 26.

Richard Medley, president of Medley Investment Group, a New York-based private organization, said it will become clear in 20 days whether Japan has returned into recession. Within this period, the Bank of Japan’s quarterly “tankan” survey and figures for September retail sales will be announced.

If the figures are weak, pressure will mount “steadily and aggressively from all quarters for a change in Japanese fiscal policy,” he told reporters. Washington will follow the markets in such moves, he added. Medley was visiting Japan on his way back from Hong Kong, where he attended the International Monetary Fund and World Bank meeting. The Group of Seven industrialized nations agreed last week on the need for Japan to spur domestic demand to avoid an excessive trade surplus.

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