• Kyodo

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U.S. President George W. Bush urged Prime Minister Junichiro Koizumi on Tuesday to accelerate efforts to achieve sustainable economic growth, while endorsing progress on Japan’s reform efforts, a Japanese official said.

The two leaders met on the sidelines of the Group of Eight summit of major powers at the Rocky Mountain resort of Kananaskis, Canada. The summit is scheduled for Wednesday and Thursday.

On noneconomic issues, Koizumi was quoted as praising Bush for his recent speech on a new Middle East policy and saying he wants to further strengthen bilateral ties due to the importance of solidarity in the international community on fighting terrorism.

Koizumi told Bush his structural reform efforts have been bearing fruit and the disposal of nonperforming loans at Japanese banks is progressing well, the official said.

“Reforms have been carried out steadily, and I will further move ahead with privatization of governmental bodies, which is the most difficult part of the reforms,” Koizumi was quoted as telling Bush.

While endorsing such progress, Bush told Koizumi that Japan plays a substantial role in the world economy and that its economy needs to be further strengthened so it can play a bigger role.

A U.S. official said Bush “expressed his confidence in the fundamental strength of the Japanese economy.”

Koizumi told Bush that Japan declared in May its economy had bottomed out and pledged he will enhance efforts to steadily promote economic structural reforms and deregulation, the official said.

But the Japanese official said Koizumi refrained from briefing Bush on Japan’s new economic and fiscal policy pledges intended to revitalize the economy. The plan includes calls for comprehensive tax reforms, including cuts in the corporate tax rate.

Koizumi is expected to discuss the plan at the G8 summit.

The bilateral talks were the fifth between Koizumi and Bush, following a meeting in February when the U.S. president visited Tokyo.

The Bush administration generally supports Koizumi’s reform efforts and has avoided making specific requests about what Tokyo should do to rebuild Japan’s fragile economy.

But the administration has repeatedly asked Tokyo to achieve sustainable economic recovery by carrying out reform pledges to fulfill its role as the world’s second-largest economy.

Koizumi and Bush avoided touching on foreign-exchange movements and falling share prices in the United States and Japan, the official said.

Market players had paid close attention to what they said about the recent plunges in U.S. share prices because the falls have cast doubt about the strength of the U.S. economy as well as the global economy.

On the foreign-exchange market, the Japanese government is concerned that recent falls in the value of the dollar may hamper Japan’s economic recovery by hurting exports.

Bush, however, made a comment after the meeting hinting at tolerance of the dollar’s fall.

“The dollar will seek its appropriate level based on market forces,” Bush told reporters before his bilateral meeting with Canadian Prime Minister Jean Chretien.

On the Middle East, Koizumi said he praises Bush for showing leadership by actively participating and presenting a vision of how the conflict between Israel and the Palestinians should be resolved.

Bush told Koizumi he will “call for the selection of a new leader” to represent the Palestinians, adding there needs to be new dynamism in reforming the Palestinian Authority, the official said.

In the new U.S. policy on the Middle East announced Monday, Bush endorses creation of a provisional Palestinian state and sets tough conditions, which include the removal of Palestinian leader Yasser Arafat.

Though the two leaders discussed Arafat’s status, the official refrained from disclosing details of the conversation.

The Japanese government has said it believes Arafat is currently the only viable representative of the Palestinians.

Koizumi was also quoted as saying he basically supports Washington’s proposal to reduce weapons of mass destruction and expressed pleasure over the cooperation between the United States and Russia to reduce their stocks of nuclear warheads.

Bush said he is concerned about the proliferation of weapons of mass destruction from Russia to Iran, an official said.

On the world’s commitment to assisting in the reconstruction of war-ravaged Afghanistan, Bush urged Koizumi to join him in reminding the donor countries to carry through with their pledges. He said the promised aid must be disbursed but the implementation is not moving forward as hoped.

Koizumi reiterated the two countries’ plan to have their foreign ministers discuss ways to resolve issues involving the U.S. military presence in Japan, especially in Okinawa, where most of the bases and personnel are concentrated.

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