November 1, 2001

The United States and Japan Launch New Financial Talks

The U.S. Department of the Treasury and the Japanese Ministry of Finance and Financial Services Agency, as co-chairs, today launched a new series of bilateral financial and macroeconomic talks pursuant to the U.S.-Japan Financial Dialogue, which is a key component of the U.S.-Japan Economic Partnership for Growth announced June 30, 2001 by President George W. Bush and Prime Minister Junichiro Koizumi. Officials from U.S. financial regulatory agencies also participated.
The Working Group on Financial Services, which met for the first time, discussed financial issues of concern to both countries, including recent policy developments with respect to financial restructuring, financial supervisory and regulatory policy issues, and market access issues. U.S. and Japanese representatives also exchanged views on recent developments in their respective financial markets and outlined their macroeconomic policy responses to slowing global growth following the September 11 attack.

The US side described the implications of the economic slowdown on the financial sectors in the United States. The US government stressed the importance of continued careful monitoring by the regulatory and supervisory authorities. The Japanese side stressed that banking sector reform is a critical part of the Government's economic program. They described their measures to resolve bad debt problems in the banking sector, including their plans to encourage banks to adjust their provisioning in response to market signals regarding major borrowers, and to strengthen and expand the role of the Resolution and Collection Corporation (RCC). The U.S. side welcomed the Government of Japan's strong commitment to implement measures to address weaknesses in bank and corporate balance sheets. They stressed the importance of proper classification and provisioning in providing incentives for banks to reduce their bad loan holdings. The U.S. side noted the measures to strengthen the RCC, and recalled from their own Savings and Loan experience the importance of an independent body, focused solely on minimizing taxpayer cost, that drew heavily upon private sector expertise to achieve a prompt return of assets to the market.

Each side discussed recent changes in financial policy and raised a number of market access concerns. The U.S. side welcomed Japan's actions to introduce defined contribution pension plans and facilitate foreign investment in Japanese

Government Bonds through global custodians, and noted their importance. Both sides agreed to continue and deepen these discussions in the Economic Partnership. The United States welcomed the implementation of Japan's no-action letter system, and looked forward to its continued development.

The participants discussed the macroeconomic situation in their two countries, and policy measures taken in response to the economic dislocations arising from the September 11 attacks. The U.S. side described the Administration's initial fiscal response, which included $45 billion in disaster aid, security enhancements, and help with rebuilding. The Japanese outlined their recent fiscal situation and fiscal policy developments, including tax aspects. The U.S. side noted the importance of appropriate fiscal measures in encouraging economic restructuring.

The intensive discussions in the Working Group support the U.S.-Japan Financial Dialogue. Chaired by Treasury Undersecretary John Taylor and Ministry of Finance Vice Minister for International Affairs Haruhiko Kuroda, the Financial Dialogue serves as a high-level forum for the Department of the Treasury and the Ministry of Finance and the Financial Services Agency.

The Working Group meeting was chaired by Mr. Tadashi Iwashita, Senior Deputy Director General, International Bureau, Ministry of Finance, Mr. Yoshio Okubo, Deputy Commissioner, Financial Services Agency, and Mr. Mark Sobel, Acting Assistant Secretary for International Affairs, Department of the Treasury.