WASHINGTON – Federal Reserve Board Chairman Alan Greenspan and two key economic aides to U.S. President George W. Bush on Wednesday urged Japan to do more to put its flagging economy on a steady recovery track and serve the interest of the global economy.
In testimony to Congress, Greenspan said Japan should do more to prevent its ailing economy from affecting the rest of the world.
U.S. Treasury Secretary Paul O’Neill, speaking during a visit to Toronto, said Japan is moving “far below its economic growth potential.”
“It’s pretty clear the world would be better off if Japan was growing at 3 percent real growth,” O’Neill told reporters.
Meanwhile, Bush’s top economic adviser, Lawrence Lindsey, pressed the Japanese leadership to take decisive action to shore up the economy.
“The Japanese leaders know what to do. It is a matter of political will,” Lindsey said in an economic forum in Washington.
But he downplayed the significance of the possible impact of the Japanese economic slump on the U.S. economy.
Only 10 percent of the U.S. economy depends on exports, he said.
Greenspan said the Japanese economy is “essentially stagnating” and its effect has created “a significant element of dampening in world economic activity.”
The economic situation of the second-largest economy in the world cannot go “without impacting the rest of us,” Greenspan told the Senate Finance Committee.
“I should certainly hope that they can get their economy back on the track,” the Fed chief said.
Greenspan indicated the Japanese economy is performing worse than statistics show, describing it as “turgid.”
O’Neill indicated that he expects a new stimulus package to be released soon by Japan to underpin its economic recovery. Tokyo had postponed formalizing the stimulus policy until today.
“I’m ever optimistic that they’re going to announce things that propel their economy forward at a rate that they’re capable of,” O’Neill said.
“It would be great for their own people and great for the rest of the world to have that sense of momentum in the world’s second-largest economy,” he said.
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