- The Washington Times - Tuesday, January 22, 2002

TOKYO (Agence France-Presse) The United States urged Japan yesterday to achieve a swift recovery, expressing hope Tokyo will become an "economic engine" of the regional and global economies, officials said.

Secretary of State Colin L. Powell and Treasury Secretary Paul H. O'Neill held talks with Japanese Prime Minister Junichiro Koizumi on the sidelines of the two-day Afghan-reconstruction conference here.

"We hope Japan will become an economic engine of Asia, the United States and the world," Mr. Powell told Mr. Koizumi, according to a Japanese Foreign Ministry official.

"Secretary of State Powell said the United States is ready to provide support for the Koizumi reforms in various ways," the official said on the condition of anonymity.

Mr. Koizumi repeated his pledge to avoid a systemic financial failure and underscored the Japanese government's willingness to work with Washington over the global economic issue and an anti-terrorism campaign.

"We will take every possible measure to prevent any financial crisis," he told Mr. Powell and Mr. O'Neill.

"We are paying very special attention to current economic conditions," the Japanese prim minister said. "We will cooperate and coordinate closely with the United States over economic and anti-terrorism issues."

Since taking office in April, Mr. Koizumi has tried to speed reforms of the government and the troubled economy, which is mired in recession for the third time in a decade.

Mr. O'Neill told Japanese Minister of Financial Affairs Hakuo Yanagisawa that the country must resolve the nation's bad-loan problems as soon as possible.

Mr. O'Neill said the problem must be resolved if Japan is to enjoy the high growth rates achieved in the past, according to a spokesman for the Financial Services Agency.

In response, Mr. Yanagisawa told Mr. O'Neill that Japan would try to clean up banks' problems with bad loans over the next two to three years, the spokesman said.

He added the Japanese government would use all possible means to avoid a financial crisis in the foreseeable future.

But Japan's immediate recovery is unlikely, analysts say, warning that Tokyo would continue to suffer from a deflationary spiral that could postpone any hope of an upturn and bring forward a full-blown financial crisis.

The meeting of Mr. Powell, Mr. O'Neill and Mr. Koizumi also was attended by Japanese Foreign Minister Makiko Tanaka and Finance Minister Masajuro Shiokawa.

"Treasury Secretary O'Neill said he wants to continue cooperation with Finance Minister Shiokawa on economic issues," the Japanese official said.

Mr. O'Neill will meet with Mr. Shiokawa today to discuss prospects for the world's second-largest economy.

"When I meet O'Neill tomorrow … we will discuss how to revitalize the economy because it is still stalling," Mr. Shiokawa told AFX-Asia.

During yesterday's meeting, Mr. Powell called on Japan to play a larger role in the region.

"Secretary of State Powell said it is desirable for Japan to assume leadership in Asia," the official said. "He said the United States supports further cooperation among countries in the region."

Last week, Mr. Koizumi visited five Southeast Asian nations and proposed a wider regional partnership as part of Japan's efforts to boost its influence in the region and revive the flagging Asian economy.

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