WASHINGTON – Finance Minister Naoto Kan said Thursday that he and U.S. Treasury Secretary Timothy Geithner agreed that fiscal rehabilitation is important when they met in Washington, saying it is a “big challenge” for Japan as well.
Bank of Japan Gov. Masaaki Shirakawa said separately in Washington that various financial regulations have been discussed to prevent another global crisis from occurring. But since the global economic recovery is “not yet solid,” it is necessary to fully study the impact they could have on the economy.
Kan and Shirakawa made the remarks prior to a meeting of top finance officials from the Group of Seven industrial powers — Britain, Canada, France, Germany, Italy, Japan and the United States.
“We discussed fiscal and economic issues,” Kan said. “Especially from my side, I told him that fiscal rehabilitation is a big challenge for Japan as well.”
Kan, noting that there is a bipartisan forum in the United States to address fiscal issues and said he wants to learn from that situation to address Japan’s mammoth state debt, which is approaching 200 percent of gross domestic product.
Kan said he also briefed Geithner about Japan’s medium-term fiscal rehabilitation plan, which is to be compiled in June.
This is the third time the two officials have held bilateral talks as the chiefs of the world’s top two economies, including over the phone.
Asked about the various debates swirling around efforts to tighten financial rules, including a bank tax, Shirakawa said more time was needed. “The global economic recovery is not yet solid, so it is necessary to fully study what kind of impact (such regulations) could have on macroeconomics” first, he said.
As for currency issues, the BOJ chief said exchange-rate manipulation was not a good idea.
“It is inadequate to use foreign-exchange rates as a solution to trade disputes,” he said, adding that his comment was not meant as criticism of the United States, which has been urging China to revalue the yuan.
The yuan has largely been pegged to the dollar since summer 2008, raising criticism that the currency is being kept artificially low to give Chinese products an advantage in global markets.
Before the meetings with Geithner and his G7 colleagues, Kan paid a visit to Arlington National Cemetery and laid a wreath at the Tomb of the Unknowns.
Although prime ministers have sometimes visited the cemetery in the past, it is rare for the finance minister to make such an official visit.
The move sparked speculation that Japan was trying to underline the importance it places on its security ties with the United States as the bilateral squabble over relocating U.S. Marine Corps Air Station Futenma in Okinawa Prefecture continues to fester.
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