U.S. SEEKS MAJOR JAPANESE ECONOMIC CHANGE IN APRIL
The United States has openly attacked
Japan's tight-fisted fiscal policy for the first time and
warned Tokyo its promised economic package in April must be
significant, senior U.S. Officials said.
    In high-level talks last week, the U.S. Criticised Japan's
overall fiscal policy as deflationary and argued that its
fiscal position is not as dire as it says.
    The criticism reflects a growing feeling among some U.S.
Policy-makers that Japan's tight fiscal policy is frustrating
attempts to stimulate domestic demand and boost imports.
    The U.S. Attack represents a distinct shift by the
conservative Reagan administration, which until recently has
been sympathetic to Tokyo's efforts to reduce the government
role in the economy, diplomats said.
    Pointing out that Japan pledged in Paris last month to take
action to boost demand, a senior U.S. Treasury official said
the April package must be more than routine.
    Japanese government bureaucrats have already said they do
not expect the package to contain much more than a rehash of
last April's measures.
    That means accelerated public investment, lower interest
rates on government housing loans and measures to pass along
the benefits of the strong yen to consumers, none of which
would have a major immediate economic impact.
    Several Japanese officials agreed that the real obstacle to
stimulating the economy is the fiscal policy pursued by the
Finance Ministry and said they welcomed the shift in U.S.
Policy.
    But they expressed concern that the move might backfire by
fanning resentment against U.S. Interference in domestic
affairs.
    Makoto Kuroda, vice minister for international affairs at
the Ministry of International Trade and Industry, said Japan
would stimulate the economy not in response to U.S. Criticism,
but to meet mounting pressure from Japanese businessmen.
    The shift in U.S. Policy is also causing some nervousness
within the Reagan administration.
    U.S. Undersecretary of State for Economic Affairs Allen
Wallis told reporters last week the U.S. Does not necessarily
want an increase in Japan's budget deficit.
    "There are many measures Japan could take to stimulate its
economy," he said.
    The argument is not new and has been raised in the past by
the Organisation for Economic Cooperation and Development.
    What is new is U.S. Backing for the position.
    At last week's talks, Japanese officials said, they argued
Tokyo had been able to maintain a tight fiscal stance and boost
the economy with funds from the giant postal savings system.
    But the Finance Ministry was interested enough to ask for,
and receive, the figures supporting the new U.S. Position, a
senior U.S. Official said.
    Other western officials are not so sure. They said it would
take time to boost public investment much further, as there are
not that many projects in the pipeline.
    Stepped-up capital spending would help domestic
construction companies, but it would not have much impact on
imports, they added.
 REUTER
