Finance officials from the United States, Europe and Canada expressed disappointment Saturday at the persistent weakness of the Japanese economy and signaled that they are unwilling to aid Japanese exporters by intervening in global currency markets to drive down the value of the yen.
Western officials conveyed those sentiments to Japanese leaders in Tokyo this weekend at a regular policy meeting for finance ministers from the Group of Seven industrial nations, composed of United States, Japan, Germany, France, Britain, Italy and Canada.
Some of the most pointed complaints about the lackluster growth of the world's second-largest economy came from the United States. In a 40-minute meeting Friday with Japanese Prime Minister Keizo Obuchi, Treasury Secretary Lawrence H. Summers urged Japan to push for a more ambitious goal than the government's current target of 1 percent growth.
Summers told reporters after the meeting that he had "expressed some concerns about the complacency of diminished expectations." Those concerns were echoed in a communique the ministers issued following Saturday's discussion. It stressed the need for "a more balanced pattern of growth among our economies."
Japan was clearly the odd economy out. The statement discerned "some encouraging signs of recovery" in Japan, but concluded that "a sustained recovery remains to be established."
It included no hint that other G-7 governments would support a concerted effort to lower the value of the yen against the euro or the dollar. While acknowledging Japan's concerns, the G-7 ministers pledged only to "continue to monitor developments in exchange markets and cooperate as appropriate"--wording identical to that from the ministers' meeting in Washington last year.
A strong yen undermines growth of the Japanese economy by making its exports more expensive, and hence less competitive, on the world market. U.S. officials have long told Japan to avoid attempting to export its way out of recession and achieve recovery driven by demand at home.
Many Japanese officials fear that the yen, which is up 10 percent against the dollar over the the last year and has been trading at the 105-yen level lately, could rise sharply next week without a strong G-7 statement on intervention.
Summers avoided making specific policy prescriptions for Japan this weekend. Instead, he cautioned against boosting interest rates or curbing public spending before the Japanese recovery is assured. He also urged continued "structural reform" in sectors such as finance and telecommunications.
Obuchi has never displayed much enthusiasm for economic reform, and in recent months his ruling party has delayed, watered down or scrapped a host of politically painful measures Western analysts deem essential to the economy's long-term rehabilitation.
Over the long term, the biggest drag on Japanese growth is the nation's declining birth rate. Japan is the only major industrialized economy in which more workers leave than enter each year, according to Jesper Koll, chief economist for Merrill Lynch in Tokyo.