bin: Japan key to world economy's future
8.34 p.m. ET (035 GMT) September 4, 1998
By Martin Crutsinger, Associated Press
SAN FRANCISCO (AP) - Japan's ability to pull itself out of a recession is the key to reviving a world economy that was battered severely this week, Treasury Secretary Robert Rubin said Friday.
But Rubin said he was not optimistic that high-level talks here with Japan's new finance minister would produce a breakthrough.
"The whole world thinks it is critical that Japan take the steps it needs to take, in banking and fiscal measures, to get back on track,'' Rubin said.
Even as Rubin met with the Japanese official, Federal Reserve Chairman Alan Greenspan told an audience that U.S. central bankers are growing more concerned about the global financial crisis' impact on America's economy - and because of that, are now just as likely to cut interest rates as to raise them.
"It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress,'' Greenspan said in a speech at the University of California, Berkeley.
Rubin, speaking to reporters flying with him from Washington, said that as the world's circumstances "become more difficult, it makes it more important that each of us do what we can do in our own countries.''
In a later interview on PBS, Rubin said: "The single most important issue is Japan getting back on track.''
For more than a year, the Clinton administration has viewed Japan as the linchpin to resolving the ever-widening Asian crisis, believing the world's second-largest economy must revive before its neighbors can.
Japan's new prime minister, Keizo Obuchi, took office this summer after the country's worst recession in 50 years had forced his predecessor to resign. While Obuchi pledged to move quickly, the United States and global markets have so far been disappointed.
In an effort to underscore the urgency of a worsening situation, the Clinton administration invited Greenspan to join Rubin for further discussions at a dinner here with Japanese Finance Minister Kiichi Miyazawa after Greenspan's speech.
Obuchi has announced more tax cuts to spur Japan's economy, but has so far refused to say whether they will be permanent, a key U.S. demand.
The United States has pushed with growing intensity for Japan to act more decisively - a point Rubin said he would make again here - at a time when world financial markets are in turmoil, the Russian economy is in chaos and many nations are plunging into deeper recessions.
Both the San Francisco meeting - and Greenspan's speech - took place after financial markets closed in New York. Capping a wild week on Wall Street, the Dow Jones closed down 42 points, at 7640.25, leaving it down a total of 411 points for the week.
Markets across Latin America also took steep dives Friday, despite a special International Monetary Fund meeting in Washington designed to calm anxious investors there.
Rubin said he did not expect a negative reaction if the San Francisco meeting, which President Clinton earlier in the week had described as "profoundly important,'' did not produce a significant breakthrough.
U.S. officials face a dwindling list of options as the world financial crisis that began a year ago in Asian countries, struck Russia and is now threatening Latin America begins to hit closer to home.
The United States has much riding on the outcome. Although its economy remains strong, many fear the troubles could result in a global recession that would drag down the American economy, which depends in part on selling to customers
overseas.
President Clinton's high job-approval ratings are closely tied to the so-far stellar economy, polls indicate. The government reported Friday the nation's unemployment rate held steady at 4.5 percent, near a 28-year low. But job growth is starting to slow in some industries.
Canada, America's largest trading partner, has seen its growth prospects weaken, and Latin American financial markets from Mexico City to Buenos Aires have
fallen sharply as nervous investors started a rush for the exits.
Canada, Mexico and the rest of Latin America combined buy 40 percent of America's exports.
In an unprecedented effort to calm fears, the IMF called together Latin American officials, who pledged Friday to keep their economies stable and remain on the path of reform.
Skeptics, though, wonder whether words are enough, believing a rapid recovery
in the hardest-hit countries is unlikely.
"These kinds of crises, combined currency and banking crises, often last two to three years at least,'' said Morris Goldstein, a former top IMF economist.
Meanwhile, criticism of the Clinton administration and the IMF is increasing. House Republicans are refusing to approve the administration's request for more money for the fund, saying it would be foolhardy in light of the IMF's dismal track record in heading off financial troubles.
The administration contends the IMF's brand of belt-tightening and austerity measures is the only option for many troubled countries. |
