Japan bank deal may not boost Obuchi at U.S. summit
02:03 a.m. Sep 19, 1998 Eastern
By Elaine Lies
TOKYO, Sept 19 (Reuters) - Japanese Prime Minister Keizo Obuchi flies on Sunday to meet U.S. President Bill Clinton with a hard-won agreement on fixing the nation's ailing banking sector under his belt.
But while the deal was touted by the government as a victory for Obuchi to take to his maiden U.S. summit, the mauling he and his Liberal Democratic Party (LDP) suffered in their struggle with the opposition to agree on the plan may well make the win a hollow one.
''The unfortunate thing about this plan is that controversy raged until the very end,'' said an editorial in the leading daily Mainichi Shimbun on Saturday, the day after the deal was clinched.
Noting that the Obuchi government, which proclaimed itself the ''Economic Recovery Cabinet'' when it assumed power in July, dearly wanted something in hand to take to the Clinton meeting on Tuesday, the paper added: ''The only thing that can be seen clearly at this point is the LDP's retreat.''
''By no means can you say the problem has been completely dealt with,'' it warned.
The plan announced late on Friday showed the ruling party had made countless concessions from its original plan, which called for the use of public funds to bolster big banks whose failure, authorities argued, would seriously jolt Japan's financial system.
The deal came after weeks of gruelling talks by party officials seeking to narrow the gap between the opposition's tough approach to the banking cleanup and the ruling party's original plan that included using taxpayers' money to smooth mergers of banks deemed too big to fail.
Obuchi said his decision to accept many of the opposition demands was based on ''my strong determination that no matter what, Japan must not cause a financial recession'' in other countries.
Obuchi also said he believed Clinton would respond favourably to the agreement. ''The U.S. president will surely show understanding towards my decision,'' he said.
Analysts say that Obuchi desperately needs to show that he can do business with Clinton, particularly in the area of revitalising the nation's economy, expected to be the major focus of their talks.
In what may be an attempt to downplay expectations for the summit, Japan says its main goal is simply to give the two world leaders, who between them control a hefty chunk of the world economy, a chance to meet.
''Since this is the first time the two have ever met, we just want to make it all as comfortable as possible,'' a Foreign Ministry spokesman said Friday.
That may be difficult, given the circumstances under which the two will meet. Obuchi is hobbled by steadily worsening popularity ratings, while Clinton is faced with a struggle to save his presidency as a result of a sex scandal.
A U.S. House of Representatives panel will release on Monday Clinton's videotaped testimony on his relationship with former White House intern Monica Lewinsky.
Although U.S. officials have repeatedly insisted the scandal will have no impact on U.S.-Japan diplomacy, the Mainichi Shimbun said it is highly likely to cast a pall over the proceedings.
''In this time of economic hazards around the world, it is unfortunate for both these leaders, who should be bulwarks against such dangers, to have their leadership at home so shadowed,'' it added.
''Markets will be watching keenly for any flaw in their discussions,'' it said.
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