Japan's Sakakibara Takes Aim at Washington
TOKYO, Feb 2 '99 (Reuters) - Japan's top financial diplomat, Eisuke Sakakibara, kept up his debate with U.S. critics on Tuesday, arguing Tokyo's financial crisis was nearly over while warning Washington against excessive optimism about its future.
Sakakibara -- speaking only days after U.S. officials cast doubt on his assessment of Japan's economy at a top business summit in Davos, Switzerland -- said Japan's banking crisis would be over in a couple of weeks if regulators and bankers could work out plans for big infusions of public funds to top-tier banks.
"The only thing I'm optimistic about is the Japanese economy," Sakakibara said to laughter after expressing worries about the global economy and rising trade friction at a symposium sponsored by the Institute for International Monetary Affairs.
"The financial crisis (in Japan) is over or ending. I think it will be over in one or two weeks," he said, adding that bank chiefs were meeting with the Financial Supervisory Agency to thrash out more drastic restructuring plans in return for public funds.
"If the FSA and the Financial Revitalisation Commission can decide on firm capital infusions in about the next two weeks, I think we'll be able to say that Japan's financial crisis, at least, is over."
Sakakibara has been singing a similar tune for weeks, most recently at a meeting of world business executives and top officials at Davos, where he said Japan's economy had hit bottom in November and December and was now headed for recovery.
Those assurances, however, were greeted with marked scepticism by senior U.S. Treasury officials as well as Vice President Al Gore.
"With due regard for the progress Japan has made, we -- all the rest of us in the world -- respectfully repeat to Japan, our friend and partner: Please, we need your help to deal with the global economic crisis," Gore said on Friday.
On Tuesday Sakakibara said Japan's economy -- struggling through its worst recession in five decades -- would, along with some other Asian nations, hit bottom in 1999.
But he added robust growth was not yet on the horizon.
Sakakibara declined, however, to comment on the turbulence which jolted Tokyo markets even as he spoke on Tuesday, saying he was unware of the latest moves.
Japanese government bond yields jumped as high as 2.310 percent and the dollar tumbled briefly by three yen to under 113 yen after Finance Minister Kiichi Miyazawa said long-term interest rates should be left to the market to decide -- for now.
Market punters are worried about a glut of government bonds as Japan seeks to spend its way out of recession.
Pointing to woes in Brazil and Russia, Sakakibara said the world financial crisis that began in 1997 was not over and U.S. share prices would not be immune if the crisis went on.
"Aren't the U.S. government and Wall Street too optimistic?" he said. "I think we now need to have a sense of crisis at least on the part of the G7 (Group of Seven) countries."
"I don't know if there's a policy of benign neglect or not, but if the United States takes such a policy, it's wrong. The crisis would hit the centre of everything, and the centre is Wall Street," he added.
Sakakibara reiterated his call for reforms to the world financial system to prevent repeated crises but added he was not optimistic that a solution could be found quickly.
U.S. officials have been cool to the notion of broad reforms to the system, including the global currency regime, while Japan and Europe are keener.
Sakakibara said trade friction between the United States and Japan and between the United States and Europe would worsen this year even if the American economy stayed strong.
"U.S.-European friction will not end with bananas and Japan-U.S friction will not end with steel," he said. "I don't think these will be isolated cases."
Copyright © 1999 Reuters Limited. All rights reserved.
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