NEW YORK – U.S. Treasury Secretary John Snow said Tuesday he hopes Japan will return to its role as an engine for the global economy by learning from the experiences of the U.S. in the 1970s and 1980s and finding its own way of fixing its economic problems.
“We all know the diagnosis by now: a distressed banking system with too many nonperforming borrowers; persistent deflation; and a rigid and overly regulated economic structure that discourages risk-taking, competition and innovation,” Snow said in a speech at a Japan Society dinner in New York.
Snow said Japan must find its own solutions to the problems, solutions that meet the needs of its unique society and institutions to win broad public support.
“I’m not here to preach American answers to Japanese problems,” he said. “I’m here to say that we believe in Japan, and that we believe that Japan will take actions to overcome these obstacles and return to a position of economic leadership and growth in the world.”
Snow said Japan can learn from the measures adopted by the United States to deregulate the transportation industry in the late 1970s and the early 1980s and tackle the savings and loan crisis of the 1980s.
“In some ways, Japan today reminds me of the picture of the United States that emerged in the late 1970s,” Snow said.
The steps taken by the U.S. in the 1970s and 1980s contributed to increasing the flexibility of the U.S. economy, making it less vulnerable to the impact of the terrorist attacks of Sept. 11, 2001, he said.
Snow also said U.S. managers and investors were studying Japan’s success in the 1970s and 1980s. “We did not remake ourselves as Japan. But we incorporated Japanese practices within American institutions, and we were better for it.”
Snow emphasized the need for Japan to promote economic reforms without fearing the changes. “Businesses that learned and adapted survived and prospered. Those that refused to change have failed and vanished,” he said.
As signs of a change in Japan, Snow welcomed the creation of the Industrial Revitalization Corp. of Japan, a government-backed body to help rebuild heavily indebted but commercially viable firms.
He said he was encouraged by the action taken by the Japanese government to preserve the stability of the banking system after Resona Bank fell into deep financial trouble.
The Japanese government said Tuesday it will inject 1.96 trillion yen into Resona Bank to shore up the bank’s capital base and try to avoid a financial crisis in Japan.
Snow tacitly urged the Bank of Japan to redouble its efforts to end deflation through an aggressive monetary policy. “We have high expectations for stronger money growth as a means to eliminate deflation,” he said.
There was no reference in the speech to the yen-dollar exchange rate. The dollar has been under selling pressure against the yen and the euro.
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