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.