Rubin kicks off his Asian tour to clear doubts

Rubin kicks off his Asian tour to clear doubts

LOS ANGELES (Reuter): U.S. Treasury Secretary Robert Rubin set
off on Thursday for an eight-day trip to Asia with some
explaining to do about America's role in the region.

Rubin, who will go to Indonesia for a weekend meeting of Asia-
Pacific finance ministers and then on to India, is hoping to use
the trip to enhance U.S. influence in the world's fastest-growing
economic area.

"We are a Pacific nation and we must aggressively integrate
ourselves into the economies of Asia and the Pacific,"' Rubin
told the World Affairs Council here.

But he could face some tough questioning from fellow ministers
in the 18-strong Asia Pacific Economic Cooperation (APEC) group
about the weakness of the dollar and the fall-out from Mexico's
economic crisis.

The dollar's steep fall against the Japanese yen this year has
hit Tokyo and some of its fellow Asian nations hard.

Japanese exporters are finding it tougher to turn a profit
because of the strong yen. And their travails are threatening to
undercut the country's halting economic recovery.

Asian nations like Indonesia are suffering because much of
their debt is denominated in yen. In response, some have begun
diversifying their foreign currency holdings by selling off
dollars to buy yen, raising questions about the greenback's
ability to remain the world's key reserve currency.

"Since the dollar is falling and it is called the world's
reserve currency, I hope the United States will take an active
stance in defending the dollar," Japanese Finance Minister
Masayoshi Takemura, who will meet Rubin over the weekend, said on
Wednesday.

Strong dollar

Rubin has repeatedly professed his desire for a strong dollar,
but the United States has so far shied away from taking tough
action to make that a reality.

Washington instead seems content to let Tokyo stew under the
pressure from the strong yen, hopeful that will prod the Japanese
government into attacking its big trade surplus -- by stimulating
its economy to boost demand for imports and by opening up its
markets.

Japanese corporations are likely to respond to the yen's
latest surge by moving more production facilities offshore to the
rest of Asia -- and that could spell trouble for America.

"We have reason to be concerned if Japanese investment in Asia
outpaces our own," Commerce Undersecretary Jeffrey Garten said on
Thursday during a visit to China.

U.S. prestige has also been bruised by the economic crisis in
Mexico, itself an APEC member, analysts said.

The crisis -- which was triggered by a sudden stampede of
foreign investors out of the country -- highlighted the risks
faced by developing nations that have lifted restrictions on
capital flows into and out of their financial markets.

Washington has been pressing emerging market economies in Asia
to speed up liberalization of their financial markets, but they
have resisted, backed up by Japan.

"The results (of our talks so far) are disappointing," Rubin
said. "I will press hard (for better results)."

Washington has threatened to penalize emerging market
economies in Asia and Latin America if the they don't come up
with better offers of financial market liberalization by June 30.