Wealthy countries describe Japan's problems as serious

The officials are concerned that troubles in the world's second-largest economy could cause renewed financial turmoil in Asia and beyond.

"The challenges facing Japan are serious and have intensified in recent months," the group said in a joint communiqué.

The economic fallout from the Asian crisis was topic No. 1 during more than five hours of discussions of finance ministers and central bank presidents from the world's seven wealthiest industrial countries - the United States, Japan, Germany, France, Britain, Italy and Canada.

Japan signed off on the communiqué from the G-7 group but participants indicated there were some differences of view on the issues.

"I would not describe it as heated," Treasury Secretary Robert Rubin said of the afternoon talks. "The Japanese government officials very much wanted to express their views and I think other G-7 ministers ... wanted to express their concerns and their focus on the enormous importance of these objectives being achieved."

Financial markets had been wary in advance of yesterday's meeting, wondering whether the seven nations would embark on a coordinated effort to boost Japan's flagging currency, the yen, by intervening in currency markets.

But Rubin had told reporters not to expect any policy change and the language on currencies in the final statement largely tracked wording used when the G-7 officials last met in February in London.

In both statements, the finance ministers and central bank directors said that "excessivatility" was undesirable. But the new statement made no explicit commitment to intervene and instead said the group supported Japan's efforts to deal with the problem "by stimulating domestic demand led growth."

That wording echoed comments the Clinton administration has been making with increasing frequency recently as the Japanese economy appeared to be teetering on the brink of a recession.

Bowing to strong foreign pressure, Japanese Prime Minister Ryutaro Hashimoto last week proposed a $75 billion package of tax cuts and new government spending aimed at restarting Japan's economy.

While that was the biggest in a series of stimulus efforts attempted by Japan, financial markets have been skeptical, believing it is too late to keep the country out of a recession.

Japanese Finance Minister Hikara Matsunaga told reporters the group had shown "great understanding" about the Japanese efforts. Vice Finance Minister Eisuke Sakakibara said the ministers also talked about the potential threats from the high-flying U.S. stock market.

04-16-98