Staff writer Japan and the United States will hold a conference of senior government officials and business leaders in Tokyo on March 1 to discuss ways to further accelerate direct foreign investment in Japan, government sources said Wednesday. According to the Ministry of International Trade and Industry sources, the participants in the conference -- the first of its kind -- will include Takashi Fukaya, the international trade and industry minister, Thomas Foley, the U.S. Ambassador to Japan, and Noboru Hatakeyama, chairman of the quasi-governmental Japan External Trade Organization. The sources said Prime Minister Keizo Obuchi may also attend the conference to demonstrate Tokyo's determination to further promote American and other foreign countries' direct investment in Japan. The results of the talks will be followed up by the Working Group on Investment and Buyer-Supplier Relationship, which has been meeting since 1993 under the auspices of the Framework for a New Economic Partnership, the sources said. The Framework for a New Economic Partnership, or the Japanese-U.S. framework economic talks, as they are more commonly known, was launched at a Tokyo meeting in July 1993 between then-Prime Minister Kiichi Miyazawa and President Bill Clinton. In the framework talks, the U.S. has urged Japan to remove what it perceives as legislative, regulatory and other barriers to direct foreign investment in Japan. The Working Group on Investment and Buyer-Supplier Relationship adopted a document in July 1995 describing and prescribing policies and measures aimed at improving the investment environment, not only in Japan but also in the U.S. The group has since been monitoring progress on policies and measures included in the document. In a welcome trend for both Japanese and U.S. government officials, direct foreign investment in Japan has been rising sharply for the past couple of years. According to figures released by the Finance Ministry, foreign investment in Japan nearly doubled in terms of value in fiscal 1998 from the 1997 level, totaling 1.34 trillion yen. The pace of growth in such investment is even accelerating. The U.S. accounted for about 60 percent of the overall investment in Japan in fiscal 1998, making 807 billion yen in such investment -- more than five times the fiscal 1997 figure. But the administration of President Clinton appears to be still dissatisfied with Japan's efforts to deregulate. Treasury Secretary Lawrence Summers reportedly said in Tokyo last weekend, "As I look at economic developments, there is a sense of some increase in confidence and some increase in foreign activity here. But there is also a sense of barriers." He said the barriers discriminate against foreigners in some cases and even block investment in other cases. He was in Tokyo for a meeting of finance ministers and central bankers from the Group of Seven major industrialized countries. There seems to be a consensus within the Japanese government that more direct foreign investment will be in the interest of the Japanese economy in the long-term. The Japanese-U.S. working group on investment said in a report issued last April that "foreign direct investment contributes to the long-term expansion of the economy through improvement in terms of economic supply, and in addition to this, the importance of expanding foreign direct investment in Japan is increasing in view of the current economic situation of Japan. "In an age of accelerating globalization, expansion of inward foreign investment is considered important in both countries, especially in Japan, given its recent weak economic performance." But amid the prolonged economic recession and with Lower House elections due by October, political pressure is mounting against further deregulation of the Japanese economy, which would open it wider to foreign competition. Some government ministries and agencies also remain less than enthusiastic about deregulation, apparently for fear of losing their grip on some industries. The fiscal 1998 investment figure itself may be no surprise at all, given the headlines that foreign companies' merger and acquisition activities targeting Japanese companies have made in recent years. The biggest headline-grabbing deal was the purchase by France's Renault SA last May of a controlling 37 percent stake in Nissan Motor Co., the financially troubled No. 2 Japanese automaker. While the value of direct foreign investment in Japan nearly doubled in fiscal 1998, the number of such investment cases was up only about 20 percent, at 1,542. This suggests that the number of large-scale direct foreign investment cases is growing. Although the manufacturing sector still received more than half of the value of the overall investment in fiscal 1998, the non-manufacturing sector, led by financial services, is gaining a larger share of the total. Foreign direct investment in the banking and insurance industry nearly tripled to 456 billion yen in fiscal 1998 from 161 billion yen in fiscal 1997, reflecting foreign investors' growing interest in that industry as the Big Bang financial deregulation takes hold. A group of foreign investors led by U.S.-based Ripplewood Holdings is expected to reach a final agreement with Japanese financial authorities by this spring on buying the failed and nationalized Long-Term Credit Bank of Japan. Four corporate groups, include two foreign alliances, are also vying to purchase the Nippon Credit Bank, another long-term credit lender that collapsed under the weight of huge bad loans and was placed under temporary state control at the end of 1998. Most analysts agree that in addition to deregulation of the Japanese economy, the lower prices for land and stock -- which reduce the cost of investing -- and growing optimism about the country's economic recovery are also fueling the current foreign investment spree. During the so-called bubble economy of the late 1980s, the value of Japan's direct investment in foreign countries was up to 20 times as much as that of foreign investment in Japan, but the investment imbalance narrowed significantly to a four-to-one level in fiscal 1998. While welcoming sharply rising foreign investment in Japan, a senior MITI official cautioned that it remains to be seen whether the growth will become an established and lasting trend. "I personally am not yet convinced that big deals similar to the Renault-Nissan alliance will continue to be made in Japan in the long-term," the official said, requesting anonymity. "If that does not happen, the growth in the value of foreign direct investment in Japan may slow down. Therefore, Japan needs to further improve its investment climate through deregulation," the official added.