Obuchi Vows to Revive Japanese Economy

Prime Minister-designate Keizo Obuchi of Japan promised U.S. officials Sunday that he would do “whatever it takes” to revitalize his nation’s economy and help to reverse Asia’s yearlong financial crisis.

Meeting with Secretary of State Madeleine Albright here at a gathering of foreign ministers from Southeast Asia and other nations, Obuchi said he is committed to following through on a $42.5-billion tax cut next year and a $71-billion stimulus package this year that he outlined during his recent campaign.

Albright pressed Obuchi, who is expected to be formally named prime minister Thursday, to move with a sense of urgency to jump-start his nation’s economic recovery.

“Prompt and decisive action is going to be particularly important,” a senior State Department official told reporters accompanying Albright. “They know the markets are watching.”

Despite the change in leadership in Tokyo, the Clinton administration is concerned that Obuchi may not be willing to move fast enough to prevent the crisis in Asia’s largest economy from deepening, with a spillover effect throughout the already troubled region. In other political roles, Obuchi has a record of slow consensus-building rather than bold leadership.

But in what U.S. officials described as a “warm” personal exchange, Obuchi went out of his way several times to candidly acknowledge his past reputation and to promise that revitalizing Japan’s economy would be the top priority on his agenda.

“It was clearly on his mind that his past record was not to be decisive,” said another senior U.S. official present at the meeting.

Japan’s vital role in helping reverse the yearlong economic crisis was underscored here at the annual summit of the Assn. of Southeast Asian Nations. Obuchi, who is still foreign minister, came under further pressure from his peers in an ASEAN communique issued over the weekend to move quickly to revive Japan’s economy as the engine for spurring broader regional growth.

Japan is the major trading partner, investor and source of development assistance to the nine-nation ASEAN bloc--the Philippines, Indonesia, Malaysia, Thailand, Vietnam, Laos, Singapore, Myanmar and Brunei--as well as to several other Asian nations. Japan’s allies near and far fear that they will be dragged into a prolonged recession unless Tokyo takes immediate measures.

Japan’s problems include banks reeling because of bad loans, a pension system near bankruptcy and rising unemployment.

In the first meeting between a senior U.S. official and Obuchi since the latter was named to head the Liberal Democratic Party on Friday, Albright sought to convince the incoming Japanese leader that a tough stimulus package of tax cuts and increased spending combined with economic deregulation, market openings and major banking reform are worth any short-term pain.

The U.S. approach at this opening session has been to play to Japan’s long-term trends, such as its graying population and high rate of individual saving.

“These are thing that are in the interests of the Japanese people. The only way that Japan will pay for the needs of an aging society is with a growing economy,” the senior State Department official said. “A lot of things one is talking about in the area of financial sector reform will bring big benefits to Japanese savers.”

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During his 12-hour visit here Sunday, Obuchi also blitzed through a series of meetings with the foreign ministers of Russia, China, South Korea and the Philippines, and met with Joseph Estrada, the new president of the Philippines.

During Albright’s meetings with Asian counterparts during her three-day visit here, she will offer the incentive of new U.S. investment if ASEAN states take bolder action to clean up their economic mess.

Based on meetings with leaders of major businesses in San Francisco on Friday before flying to the Philippines, Albright will tell the foreign ministers that U.S. investors have a “genuine interest” in investing--but with conditions.

“U.S. business would love to get into some of these countries, but they find that in some of the sectors where they have an interest they don’t see types of arrangements or conditions that would get them involved,” the State Department official said.

The U.S. team of diplomats and economists accompanying Albright is hoping to persuade the Asians to introduce greater openness in the practices of private sector businesses and better accounting and transparency in the public sector.

“We want to talk about working together,” the official added.

New U.S. investors in the region “will require commitments on the other side to long-term nondiscriminatory treatment,” the senior official said. “They would like broad, nondiscriminatory rules on investment so that [there are] no special arrangements, ownership limitations and things of that sort.”