Asia Times: Obuchi: Japan won't spend more to spark growth



	May 07, 1999	atimes.com

Japan Economy

Obuchi: Japan won't spend more to spark growth
By Dina Temple-RastonBloomberg News

Washington - Japanese Prime MinisterKeizo Obuchi said Japan's spending packages and bank-overhaulmeasures are setting the stage for a ''major turnaround'' in theeconomy, and the government has no plans to release more money.

''We have adequate policy measures in place,'' Obuchi saidduring a press conference at the White House with President BillClinton. ''We will continue to look at developments as theytranspire.'' Clinton said only that Japan should keep itsspending measures in place until the economy recovers from itsworst postwar recession.

The comments further dashed speculation - fueled in thelast week by some Japanese officials themselves - that thegovernment might increase spending beyond the 120 trillion yen($1.02 trillion) it has sunk into the economy since 1992. Thedollar rose on expectations Obuchi wouldn't come up with further spending plans.

Clinton praised Obuchi for being ''very aggressive on theeconomy in the last year,'' saying the government adopted ''far-sighted legislation to reorganize the financial institutions andget them back to health."

Japan also pledged to further dismantle regulations onits utility, construction and telecommunications markets to helpU.S. companies such as General Electric Co., Weyerhaeuser Co. andU.S. West Inc. expand in the world's second largest economy.

Yet currency traders are looking for more immediate steps tospark growth.

''Those are the kinds of things that get the focus off theshort-term needs of the economy,'' said Bob Sinche, a currencystrategist at Citibank. ''It has got to be more short-term growthstimulation."

Japan is facing its second year of recession, with itsjobless rate at a postwar high and consumer spending sluggish.Obuchi said the biggest concern is the trillions of yen in badloans weighing down the banks.

The government in March agreed to inject 7.5 trillion yen inpublic funds into 15 major banks and last month established acompany to buy assets from failed financial companies and collect debt.

''The greatest problem for the Japanese economy was thefinancial sector problem and I believe we now see the financialsystem moving ahead and regaining international confidence,''said Obuchi.

Still, Obuchi is under pressure to provide a quicker fix forthe economy to help pull other Asian nations out of recession andcut a trade surplus with the U.S. that last year was $64.1billion - its widest in four years and the second highest on record.

The deregulation agreement is aimed at narrowing that tradegap, although it's only the latest in a series of accordsthroughout the years that have sought to open Japanese markets toeverything from U.S. automobiles to oranges, with mixed results.

Under the new commitments, foreign electricity-generatingcompanies will no longer need prior approval to build or upgradefacilities in Japan and instead can simply notify the government.This will reduce paperwork that has discouraged GE, WestinghouseElectric Corp. and other U.S. companies from upgrading facilitiesin Japan.

Deputy U.S. Trade Representative Richard Fisher said theagreements would benefit Japan's economy as well. ''They cannothave a sustained recovery without making these changes,'' hesaid.

Some company executives agreed. ''This package demonstratesthe seriousness of purpose in Japan to press forward withstructural reform,'' Michael Gadbaw, a GE vice president andsenior legal counsel, said last week.

Many of the deregulation proposals, such as a plan to lowerphone-connection rates, were made a year ago in Birmingham,England, during the Group of Seven industrialized nations summit.

Other commitments include:

- a promise to open up cable television to 100 percentforeign investment;

- establishment of performance standards for three-story,multifamily wood housing to make it easier for U.S. companies tosell building materials;

- the liberalization of securities derivatives and easingthe process of registering securities companies in Japan;

- strengthening accounting and disclosure rules;

- speeding up customs processing, including linking theU.S. and Japan's customs computer systems;

- creating formal public comment procedures for making,changing and rolling back regulations in Japan;

- speeding approval of pharmaceuticals and medical devices.

Japan promised to reduce by April 2000 the time it takes toapprove new drugs to about one year from more than three now. Andthe government dropped plans for a country-wide reference pricefor pharmaceutical products.

U.S. officials had objected that the reference price, often set lower than market prices, would prevent drug companies fromrecouping research costs for new drugs. Japan bases the price ofnew drugs on the cost of similar new drugs.

Japan's pharmaceutical market is worth more than $40billion, and a reference price system could have hurt companiessuch as Pfizer Inc. that are selling new drugs, like Viagra, inJapan at comparable U.S. prices.

Japan agreed to change the way medical insurance companiesreimburse for medical devices, making it easier for companies tocharge more for newer, better technology.

The government said it would ease rules that made itdifficult to use U.S. two-by-fours in residential constructionbecause of height restrictions, USTR said.

As for telecommunications, Nippon Telegraph and TelephoneCorp. is the only phone company in Japan that owns a networkreaching almost every home and business. Interconnection rates inJapan are about 10 times higher than in the U.S., said ScottBlake Harris, managing partner with Harris Wiltshire & Grannis, aWashington, D.C., telecommunications law firm.

Lowering those rates would benefit MCI WorldCom Inc. andWinStar Communications Inc., a wireless company that recentlystarted competing in Japan, Harris said. Also, it will helpcompanies providing phone service via cable-TV lines, likeMediaOne Group Inc. and AT&T Corp., which recently purchased Tele-Communications Inc.

''It's a step that's long overdue,'' Harris said. ''Theinterconnection rates in Japan have been scandalously high."

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©1999 Asia Times Online Co., Ltd.