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Tuesday, September 22, 1998 Published at 21:27 GMT 22:27 UK

Business: The Economy

Clinton tells Obuchi to speed up reforms

Keizo Obuchi and Bill Clinton have both been under pressure

US President Bill Clinton has told Japanese Prime Minister Keizo Obuchi there was "virtually unanimous support in the world" for financial reforms to restore growth in Japan and Asia.

But he urged a speedy response to the crisis.

The two leaders held talks for around two hours in the Waldorf Astoria hotel in New York on Tuesday.

The summit came amid growing international concern about the fragility of the Japanese financial system and its potential disastrous impact on the rest of Asia.

[ image: Mr Obuchi's reputation is at stake]
Mr Obuchi's reputation is at stake
Mr Obuchi was asked if he thought he would succeed in persuading the Japanese parliament to pass economic reforms.

He said: "I am neither optimistic or pessimistic on this."

Mr Clinton said the United States wanted to help Tokyo find a way out of its problems but avoided any public comments pressing Japan to accept specific policies.

The US president said he realised the Japanese government would have to work out what was "politically possible".

He added: "We want to do what we can to be supportive to help do whatever we can to create the climate which would permit a quick restoration of economic growth in Japan and therefore in Asia."

He said he had invited the Japanese prime minister to come back for a formal state visit early next year.

Fears over reforms

US officials said the American team had particularly wanted to hear more details about the Japanese plan for fixing its ailing banking system agreed last Friday between opposition and ruling party leaders.

The deal failed to work out how the government would deal with bank debts of nearly a trillion dollars and was threatening to fall apart in Tokyo.

White House spokesman Mike McCurry said: "We obviously have our concerns about the reforms we believe are necessary in the Japanese banking system and its financial system generally."

'Japan will stick to banking deal'

However Japan's ruling Liberal Democratic Party has promised to stick to the political compromise reached on how to sort out Japan's debt-ridden banking system.

Yoshiro Mori, secretary-general of the LDP, said the government would stick to the plan to take the troubled Long-Term Credit Bank of Japan into state ownership, rather than inject public money into the failing private institution.

Over the weekend, Mr Mori had appeared to be backing away from the deal when he told a television programme that the LDP would like to have "a few more choices" as well as nationalisation.

Markets worried

Japanese investors were also worried by the continuing political wrangling.

On Monday, Tokyo's main share index, the Nikkei, fell 385.82 points, or 2.8%, to close at 13,597.30 points, the lowest finish since February 25, 1986.

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