The Group of Seven deputy finance ministers meeting in Tokyo joined officials from 11 Asian countries in stressing the urgent need for change. But there were few signs that the Japanese government had offered the meeting anything more than a vague commitment to bail out Japanese banks staggering under a pounds 300bn load of bad debts.
"It is of vital importance to Japan, to the recovery of Asia, and to the entire world economy that Japan restores its banking system to health, achieves domestic demand-led growth and opens and deregulates its markets," the officials said in a statement.
Until last week the US had said it could do nothing to help Japan overcome its worst recession since the Second World War until it helped itself, but on Wednesday Washington spent $2bn to prop up the yen. Yesterday President Clinton said he had changed his mind because, on the eve of his visit to China this week, he feared a falling yen would force Peking to devalue the yuan, triggering a round of beggar-thy-neighbour Asian currency devaluations.
Financial markets reacted positively to Washington's support for the yen, but traders are likely to react cautiously to news of the Tokyo meeting when markets open. US deputy treasury secretary Lawrence Summers said in Tokyo yesterday: "What's very important in this window of opportunity is the concrete policy steps Japan takes."
Analysts say that if Japan does not offer persuasive solutions before its upper house elections on 12 July, the yen will resume its fall against the dollar. The fear then will be that this will further destabilise the world economy. "US companies face a fall in profits year on year," said Merrill Lynch global strategist Trevor Greetham. Such a decline may spook the US stock market, on which hopes for world economic recovery rest.
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