Mori, Bush plan policy body to boost economies

Mori, Bush plan policy body to boost economies

TOKYO (Reuters): Japanese Prime Minister Yoshiro Mori and U.S. President George W. Bush will announce the creation of a two-way consultative body on economic policy after their summit this week, Kyodo news agency said on Saturday.

Monday's summit in Washington between Bush and Mori is likely to be dominated by the woes of the world's two largest economies as well as slumping stock prices in both countries.

It was unclear how much the planned consultative body could achieve.

The new body's establishment aims to allay widespread concern that slowing economic activity in Japan and the United States, which together account for about 40 percent of the world's gross domestic product, could trigger global recession, the news agency said.

"It is our interest that Japan be economically strong and prosperous... Japan's slow growth has implications for the United States and the rest of the world," Kyodo quoted White House spokesman Scott McClellan as saying on Friday.

The new body could be patterned along the lines of a proposal by Trade Minister Takeo Hiranuma for a roundtable group of government and private-sector representatives, the agency said.

The summit communique will also call for an early start to the next round of World Trade Organization talks on trade liberalization, the agency said.

The communique will not mention stock prices, however, nor the huge volume of bad loans weighing on Japanese banks that has become an increasing source of concern for both the government and financial markets.

Japan's problems are starting to worry the United States, where Secretary of State Colin Powell said on Thursday U.S. officials were meeting about Japan's fragile economy, which he warned could even pose a security threat to the United States.

"We are concerned about the Japanese economy, and it has been a source of meetings with the new team," Powell told the House of Representatives Budget Committee.

Powell said the United States did not have a "laissez faire" attitude toward Japan and intended to give Mori "the benefit of our thinking on this matter".

The Bush administration has chosen a deliberate hands-off approach to advising the world's number two economic power what it can do to get back on track, but anxiety about Japan is compounded because its economy also has rapidly slowed. And the United States has reasons for concern.

The steady crumbling in Japan's yen currency, which weakened on Friday to 22-month lows around 123 yen to the dollar, worsens already-huge U.S. trade deficits with Asia's key economic power by making it more costly to sell American goods to Japan.

While the United States badly wants Japan to reform its moribund economy and take on a bigger role in sustaining global growth, it also needs Japan as an Asian ally and as a source of investment capital to finance Americans' free-spending habits.

Mori, deeply unpopular at home, where he faces intense political maneuvering to replace him, sees most of Japan's problems originating elsewhere, specifically the United States.

There are scant expectations for Monday's meeting between Mori and Bush, however, with the Japanese prime minister's remaining time in office likely to be brief.

Mori will explain to Bush a set of economic stimulus measures considered by Tokyo, Kyodo quoted Japanese Ambassador to the U.S. Shunji Yanai as saying in Washington.

The Oval Office meeting between Mori and Bush will be followed by a working luncheon, he said. Bush's top economic adviser Lawrence Lindsey and Treasury Secretary Paul O'Neill would probably attend, Kyodo said.

U.S. Treasury officials have declined even to talk about a possible agenda or to say whether Treasury Secretary Paul O'Neill will meet Mori separately.