U.S., Japan deepen dialogue of mistrust
04:15 p.m Sep 07, 1998 Eastern
By Linda Sieg
TOKYO (Reuters) - Maybe they should have stayed at home.
That, at least, was the reaction of some cynics to a meeting of U.S. and Japanese finance chiefs that appears mainly to have deepened mistrust among policy-makers in the world's two biggest economies.
''They might as well have done this by video conference,'' said one foreign economist commenting on the outcome of talks between Finance Minister Kiichi Miyazawa and Treasury Secretary Robert Rubin in San Francisco on Friday.
''The United States is exerting more pressure and Japan is reacting by saying the world's problems are not its fault,'' the economist said. ''It's a ... dialogue of mistrust.''
Little emerged from the talks besides familiar -- if more strident -- U.S. demands for Japan to fix its economy and its banks to help avert global disaster and insistence by Tokyo that it is doing all it can given domestic constraints.
U.S. calls for action have grown increasingly shrill over the past year as Asia's financial crisis has worsened, Russia has slid into turmoil and contagion has threatened to engulf Latin America's emerging markets.
''The U.S. side has become more open, more direct and less diplomatic,'' said Chris Calderwood, chief economist at Jardine Fleming Securities in Tokyo.
In response, some Japanese officials counter that Tokyo is being unjustly cast as the ''culprit'' behind global financial woes, the source of which they say lies beyond Japanese shores.
''It's time to end the pattern of always making Japan the culprit,'' one Japanese government source said after the talks and a dinner in which Rubin and Miyazawa were joined by U.S. Federal Reserve Chairman Alan Greenspan, a long-time friend of Japan's 78-year-old finance minister and former premier.
Behind the mounting mutual recriminations, analysts say, are both U.S. fears that emerging market turmoil will seriously damage America's economy and Japanese political deadlock, which is foiling swift action on the banking system -- even if policy-makers were prepared to take it.
''Miyazawa has a real problem -- he can't make promises and deliver on them,'' said Robert Feldman, chief economist for Japan at Morgan Stanley. ''It's a fundamental lack of consensus on policy (in Japan) that is the difficulty.''
Domestic critics, meanwhile, share much of the U.S. impatience with Japanese authorities' apparent inability to implement policies to clean up a banking system burdened by heaps of bad loans eight years after the nation's asset price bubble burst.
''Now is the time for all politicians to make a kind of unanimous agreement,'' Keikichi Honda of the Institute for International Monetary Affairs, a private think tank, said last week. ''Time is of the essence in coping with this kind of crisis.''
Japan's ruling Liberal Democratic Party, which failed to win control of parliament's Upper House in an election in July, is in fact desperately seeking to forge a compromise on banking policy with a fragmented opposition and avoid being forced to call a snap poll for the more powerful Lower House.
The government approach calls for mergers subsidized by public fund injections for troubled big banks such as the ailing Long-Term Credit Bank of Japan Ltd and public takeovers of failed smaller banks. The opposition wants to leave banks to the markets and the courts, but would provide for nationalizing banks if their collapse might disrupt the financial system.
Signs of a potential deal between the LDP and the opposition emerged last week -- but some analysts say a Lower House election may ultimately provide the only hope of resolving Japan's policy deadlock.
''It would be nice if the financial situation were resolved, either through an agreement between opposition and ruling parties or with an election,'' Calderwood said.
''The danger, of course, is that we will just exchange one government for another and still have a fragmented situation,'' he added. ''The LDP is the biggest single party in the Upper House and can just as obstructionist if they choose.''
Copyright 1998 Reuters Limited. |
