WASHINGTON – Finance Minister Masajuro Shiokawa promised Friday that he would draw up a list of measures by June to boost the world’s second-biggest economy after U.S. Treasury Secretary Paul O’Neill suggested that Japan needs to step up efforts to achieve its growth potential.
In their talks, Shiokawa told O’Neill that the measures will feature four areas — industrial revitalization, comprehensive tax reforms to support industrial efforts, deregulation and the disposal of nonperforming loans at banks — a Japanese official said at a press briefing.
O’Neill was quoted as telling Shiokawa that he firmly believes Japan has high economic growth potential, implicitly calling on Japan to take necessary measures to achieve that goal. He did not, however, make any suggestions or provide advice on how to stimulate the Japanese economy, the official said.
The two did not discuss foreign exchange rates, the official said.
O’Neill said late last month that Japan’s economy is still lagging and needs to grow at a faster rate not only for the Japanese people, but also for the global economy.
Many officials in the U.S administration have recently called on Tokyo to bring about a recovery by decisively implementing economic reforms and have urged the government here not to rely on exports or a weak yen to boost the economy.
Shiokawa told O’Neill that Japan’s economy remains in the doldrums but positive developments are emerging, the official said.
The Japanese minister has said priority will be placed on implementing tax cuts in ongoing discussions on comprehensive tax reforms and that the tax incentives will be focused on the four priority areas of information technology, biotechnology, nanotechnology and the environment.
The official said Shiokawa also explained that he would like to consider tax increases to achieve a fiscal balance after the economy stages a recovery.
Shiokawa also briefed O’Neill about the results of special audits of major Japanese banks by the Japanese Financial Services Agency, which were aimed at encouraging the banks to accelerate their disposal of bad loans, the official said.
The minister noted that the Japanese government plans to clear within two years bad loans at most of the 34 companies that were reclassified as at risk of failure or worse in the FSA audit.
The official said O’Neill accepted Shiokawa’s explanations positively.
Shiokawa and O’Neill met shortly before they joined their Group of Seven counterparts for a two-day meeting that is expected to express a relatively optimistic view of the global economy, except for lingering risk factors associated with Japan.
On the U.S. economy, O’Neill told Shiokawa that he believes the U.S economy grew at a very high pace in the January-March quarter, the official said.
Meanwhile, Bank of Japan Gov. Masaru Hayami held separate talks with U.S. Federal Reserve Board Chairman Alan Greenspan and Bank of England Gov. Edward George on Friday afternoon, prior to the O’Neill-Shiokawa meeting, and exchanged views on the two countries’ economic situations, a BOJ official said.
Hayami separately informed them of the BOJ’s efforts to help stabilize Japan’s banking system and exchanged views on the current state of the Japanese economy, the officials said.
Hayami met with Greenspan for about 45 minutes and his meeting with George lasted for around 30 minutes. It was the first time the BOJ chief had met Greenspan since last October.
During their talks, Hayami also explained Japan’s monetary policy to Greenspan, the official said.
The G-7 nations comprise Great Britain, Canada, France, Germany, Italy, Japan and the U.S.
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