• Kyodo

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U.S. Treasury Secretary Paul O’Neill urged Japanese Finance Minister Masajuro Shiokawa on Friday to carry out new measures to boost Japan’s fragile economic upswing. He also welcomed the bottoming out of the world’s second-largest economy, a senior Japanese official said.

In a meeting held in this seaside city, O’Neill dismissed emerging doubts about the strength of U.S. economic recovery. He said that the country’s productivity remains high and profits should improve in the future, the official told reporters.

Shiokawa and O’Neill did not discuss the foreign-exchange market or monetary policy in their talks held shortly before the start of the two-day meeting of the Group of Seven (G7) finance ministers, the official said.

Shiokawa told O’Neill that Japan believes its economy has bottomed out — a declaration made in a government report in May. He also briefed O’Neill on the Japanese government’s efforts to boost the economy through as tax reform and deregulation.

O’Neill said he welcomes the progress, and he expressed expectations that Japan will detail and carry out the new economic steps, according to the official.

Shiokawa outlined in the meeting five steps to be taken by the government. One of which is to boost growth in four priority areas — life science, information technology, the environment and nanotechnology — through tax reforms, deregulation and budget allocations, according to the official.

Shiokawa told O’Neill that the Japanese government plans to limit the budget for fiscal 2003 to the same level or below that of the current fiscal year.

He also promised to promote deregulation, while explaining that such reforms are already being implemented in some areas, including the nation’s postal services system.

Shiokawa went on to point out three tax reform plans — tax cuts to boost corporate investment, tax reductions for corporate research and development activities, and a cut in the inheritance tax aimed at making it easier to transfer assets from the elderly to the younger generation, according to the official.

The Japanese minister told O’Neill that Japan is making progress in disposing of the bad loans weighing down banks, and that it will continue to work on the issue, the official said.

The last time the two met was in April on the sidelines of the last G7 meeting in Washington. Shiokawa promised to draw up new economic steps by the Halifax meeting, while O’Neill suggested Japan step up efforts to achieve growth.

The two ministers did not discuss the currency market even though Japan’s recent efforts to weaken the yen have sparked frustration in Washington.

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