Scrambling to halt turbulence in currency markets, world finance officials urged Japan on Saturday to fix its economy - and fast - before it throws other Asian economies back into a tailspin.
Their hastily called meeting in Tokyo was one of the broadest since Asia's financial crisis began almost a year ago and comes just days after intervention by the United States and Japan to stop the yen's free fall against the dollar.The officials also praised China's role in containing the region's financial turmoil by refusing to devaluate its currency, and they commended economic and political reforms by Indonesia, Thailand and South Korea.
In a statement after the meeting, finance officials from 17 leading industrialized nations and international lending agencies called on Japan to revive its banking system, achieve domestic-led growth and open its markets to greater competition.
These steps are "of vital importance to Japan, to the recovery of Asia, particularly those countries affected by financial market turbulence, and to the entire world economy," the statement said.
Japanese Prime Minister Ryutaro Hashimoto also has political reasons for taking bold action. With his nation in its deepest recession since World War II, opinion polls show his government going into July 12 legislative elections with its popularity at an all-time low. He needs to show he's capable of handling his country's economic problems.
The yen's declines in recent weeks had roiled other Asian financial markets by stirring concerns about a new wave of currency devaluations like those that triggered the region's economic crisis last year.
The focus of the talks in Tokyo was Japan's efforts to revive its recession-bound economy, which caused the yen's plummet in the first place.
Speaking after the meeting, officials said they welcomed recent promises by Japanese lawmakers to take more aggressive steps in dealing with the banking industry's bad loans and reviving growth with cuts in corporate and income taxes.
"We think that all these measures are important to get the Japanese economy back on the right track," said China's assistant minister of finance, Jin Liqun.
The United States and Japan made a sudden joint foray into world currency markets after the yen fell Wednesday to its lowest level against the dollar in eight years. The yen-buying action pushed the dollar down 10 yen in just two days.
Deputy Treasury Secretary Lawrence Summers, who was dispatched Thursday on an emergency mission to hold talks on Japan's economic woes and the yen's weakness, said Japanese leaders realize they need to act quickly before the effect of the intervention fades.
"They recognize that the window of opportunity is here now and may not always be here," Summers said after the meeting.
The meeting was being watched closely for signs of just how serious Japan will be in its efforts to clean up $563 billion in failed loans left on the books of its banks from the collapse of the property market after 1992.