U.S. Deputy Treasury Secretary Lawrence Summers entered into a flurry of talks with Japanese leaders Friday — two days after the U.S. and Japan jointly intervened to prop up the ailing yen — and repeated a call for Japan to promptly clean up the bad loans weighing down its economy.
Summers’ request came during separate meetings with Finance Minister Hikaru Matsunaga, Foreign Minister Keizo Obuchi, Koichi Kato, secretary general of the Liberal Democratic Party, and others.
Kato detailed an plan the LDP is to complete working out by the July 12 Upper House election to establish a state-backed bank to take over bad assets and said the LDP would push the idea even if it meant using taxpayer money and inviting public criticism before the July 12 Upper House elections.
The U.S. government apparently sent Summers to emphasize the importance of Japan mending its economy and keeping it from destabilizing already battered Asian nations and eventually pulling down healthy economies. It is the second time this year Summers has been sent on a mission to Asia. Several months ago he traveled to Indonesia to convince then-President Suharto to abide by an IMF bailout.
Meanwhile, the U.S. dollar fell below 135 yen Friday in Tokyo for the first time in a month on expectations of the weekend meeting of Group of Seven (G-7) finance ministers’ deputies and representatives from 11 Asian economies. At 5 p.m., the dollar was quoted at 134.97-.00 yen, down from 137.30-33 yen at 9 a.m., and 137.80-90 yen late Thursday in New York.
During his meeting with Matsunaga, a senior Finance Ministry official said that Summers confirmed that U.S. and Japanese monetary authorities are ready to jointly intervene again in currency exchange markets, if necessary, to stabilize rates. They also shared the view that Japan and the United States will work closely to resolve the Asian financial and economic turmoil, the official said.
Summers was accompanied by William McDonough, president of the New York Federal Reserve Bank.
In his meeting with Obuchi, Summers stressed that the prompt implementation of measures announced earlier by Prime Minister Ryutaro Hashimoto is essential if the economy is to be stabilized, according to Foreign Ministry officials.
In his meeting with Kato, Summers demanded that Japan take swift actions to solve the bad loans burden.
Kato said that in order to facilitate disposal of nonperforming loans, the ruling party plans to draft a scheme early next month that will feature a state-backed bank to take over assets of failed financial institutions.
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