No Quick Fix for Japan, Rubin Says

Treasury Secretary Robert E. Rubin on Friday said the high-level meetings set for this weekend in Tokyo are unlikely to yield new action plans for reforming Japan’s ailing economy and such plans would “take time.”

In an interview with Reuters, Rubin said the purpose of meetings between Japanese officials and a U.S. delegation, led by Deputy Secretary Lawrence Summers, is to discuss the seriousness of Japan’s economic problems and how to nurse its sick banking system back to health.

“We have said from the very beginning there will not be policy actions,” Rubin said. “We’ve been very careful in the things we’ve said.”

He added: “These are complex problems. They are not simple problems. They developed over a long period of time, and they may well take time to go through and develop and implement the programs,” he said.

His comments prompted a brief sell-off in the yen as dealers concluded this weekend’s meetings would not produce specific action plans by the Group of Seven major industrial nations to achieve a sustained rally in the Japanese currency’s value.

Rubin said statements by senior Japanese officials as the two countries intervened in currency markets to prop up the sagging yen outlined a path of action that Tokyo planned to follow.

“The key now is for them to act and act effectively,” he said.

Though officials said the United States is ready to help again to shore up the yen, Kyodo News reported that Summers said the Japanese currency could plunge anew without decisive action by Tokyo. The dollar bought 136.10 yen in late New York trading Friday, down from 137.83 on Thursday.

The U.S. joined Japan earlier this week in an intervention into currency markets to bolster the battered yen. Rubin said judgments on any possible future interventions would be made “as we go along.”

He said a statement from G-7 deputy finance ministers meeting in Tokyo this weekend might include some “boilerplate” language on foreign exchange.

His comments undermined the U.S. stock market further but helped to bolster prices in the bond market, which drew comfort from the rising dollar.

Rubin said the mountain of bad debt hanging over Japan’s banking system is the most immediate problem for Tokyo to tackle.

Concerning the broader issue of Asia’s financial crisis, Rubin said Japan’s worsening economy had hit the region and made it much harder for other countries in the area to revive their economies.

“I would say that the continued deterioration in Japan has exacerbated the situation,” he said.

He commended South Korea and Thailand, however, for handling their problems well and taking the necessary steps.