WASHINGTON – U.S. Treasury Secretary Paul O’Neill on Saturday pressed Japan to speedily resolve the bad-loan problem and do its part to energize global economic growth.
Finance Minister Masajuro Shiokawa, meanwhile, pledged during a meeting with O’Neill to restore the health of the Japanese financial sector by stepping up efforts to implement the emergency economic package unveiled earlier this month by the government and the ruling coalition.
“As for Japan’s efforts, I explained the emergency economic package including the reform of the financial sector,” Shiokawa told reporters after the bilateral talks, held prior to a Group of Seven meeting of finance chiefs from the world’s seven major industrial countries.
Shiokawa said he and O’Neill agreed on the need for the U.S. and Japan to actively cooperate in revitalizing the global economy.
Regarding the bad-loan issue, Shiokawa said the U.S. advised Japan to examine how the U.S. government successfully resolved its savings and loan crisis in the 1980s.
The U.S. side took up its experiences “so that Japan may refer to it” in its efforts to reform the financial sector, Shiokawa said.
A Japanese official later said U.S. Federal Reserve Board Chairman Alan Greenspan, who was also present at the Shiokawa-O’Neill meeting, explained the way the United States tackled its own bad-loan problem by accelerating sales of real estate taken as collateral.
Shiokawa said, “Japan needs to improve its real-estate market conditions,” indicating that Japan plans to improve liquidity in the market in line with the economic package unveiled on April 6.
The huge amount of nonperforming loans — which have tied the hands of Japanese banks since the burst of the bubble economy in the early 1990s — is seen as a critical impediment to Japan’s early economic recovery.
Last month, U.S. President George W. Bush told then Prime Minister Yoshiro Mori that Tokyo is not making a serious effort to tackle the bad-loan issue and offered advice that bitter medicine should be taken as early as possible.
The Japanese government pledged in the April 6 economic package to purge the bad loans in the Japanese banking sector in two to three years.
Shiokawa said he told O’Neill that the Japanese government plans to improve the health of Japanese banks by restricting their holdings of other companies’ stocks, whose price falls have weakened their financial standing. Such restriction was also included in the emergency package.
Shiokawa said his explanation of the economic package “was well received” by the U.S. side. Beyond the need to shape up the Japanese economy, Shiokawa said the two sides agreed to cooperate in revitalizing the global economy.
With the two countries accounting for more than 40 percent of the world economy, such a cooperation is vital as the world economic growth is forecast to slow sharply this year. The International Monetary Fund projected earlier this week that world economic growth is likely to slow to 3.2 percent in 2001 from 4.8 percent the previous year.
Shiokawa, meanwhile, said he called on the U.S. to make further efforts to boost its economy. The U.S. economy decelerated abruptly in the latter half of 2000, but it regained strength with an unexpected 2.0 percent growth on an annual basis in real gross domestic product in the first quarter of 2001.
1.7% growth pledged
WASHINGTON (Kyodo) New Finance Minister Masajuro Shiokawa pledged Saturday that he would do his best to attain Tokyo’s 1.7 percent growth target for fiscal 2001, saying that Japan’s economy is expected to pick up sightly from spring to June.
“It is true that the Japanese economy lost momentum rapidly from last fall to the yearend, but it has now hit bottom,” Shiokawa said at a press conference after a one-day meeting in Washington of top Group of Seven financial officials.
Shiokawa, appointed finance minister Thursday under the new government of Prime Minister Junichiro Koizumi, said he thinks the economy will recover from spring to June.
“I want to make maximum efforts to make this fiscal year’s growth rate 1.7 percent,” he said.
The former chief Cabinet secretary, who made his debut on the international scene at the G7 gathering, also said he has no intentions of injecting public funds into banks to strengthen their capital bases, which have been dwindling due to the disposal of huge problem loans.
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