U.S. Official Urges Japan to Aid Economy

Deputy U.S. Treasury Secretary Lawrence Summers told Japanese Finance Minister Hiroshi Mitsuzuka that Japan should take steps to boost domestic demand and suggested that the government spend money to lift the economy, a senior Finance Ministry official said.

Summers reiterated Washington’s concern about Japan’s weak economy, the official said. Those concerns have increased in recent weeks as turmoil in other Asian economies has begun to threaten Japan’s economic prospects. Analysts have cut their growth outlook for Japan in 1998 to as low as 1.5%, and there are fears the country could slip into recession.

Mitsuzuka said he replied that Japan is moving to stimulate domestic demand and to strengthen the nation’s financial system, the official said. He also explained to Summers the failure of Hokkaido Takushoku Bank Ltd.

Japan should also cut its current account surplus, Summers told Mitsuzuka. Japan’s surplus in its trade of goods and services in the April-September period surged 350% from the same period a year ago to 2.9144 trillion yen ($23.3 billion).

Afterward, Vice Finance Minister of International Affairs Eisuke Sakakibara, who attended the meeting, was quoted as saying Japan is ready to act in the foreign exchange market when necessary to maintain stability. The comment implied the government would not let the yen lose too much value, and thus drag the dollar down, said Norimitsu Takada, of National Westminster Bank.

Summers is in Tokyo for meetings with Mitsuzuka and Bank of Japan Gov. Yasuo Matsushita. He and Federal Reserve Board Gov. Laurence Meyer are en route to the Philippines for discussions with Asian finance ministry officials about a stabilization fund for Asian economies.