Tokyo: US Treasury Secretary Henry Paulson urged Japan to continue economic reforms Tuesday after trying to quell concern about recent international stock market turmoil and the dollar’s sudden drop against the yen.
Paulson, in Tokyo on the first leg of a three-nation Asian tour, met Economy Minister Hiroko Ota and stressed the need to protect investor interests in financial reforms being carried out by Japan, Kyodo News agency said.
Paulson’s visit comes at a sensitive time, as world stock markets continue to reel in the wake of last week’s 9% drop in Chinese stocks.
Tokyo’s Nikkei 225 index recovered slightly Tuesday after losing 8.6% over the previous five trading sessions. Other Asian markets, from India to the Philippines, have also fallen sharply since last week.
The US dollar tumbled to 115.47 yen Monday, its lowest since 8 December, from above 120 yen a week ago. On Tuesday, it was trading at 116.47 yen.
On Monday night, Paulson and Japanese Finance Minister Koji Omi agreed that there was no need to be concerned about the recent market volatility and that markets mechanisms were functioning well, Omi told reporters after their dinner meeting.
Both also concurred that exchanges rates should be left to the market, he said.
Later Tuesday, Paulson expected to meet Financial Services Minister Yuji Yamamoto and Bank of Japan Gov. Toshihiko Fukui, who recently shepherded the central bank’s second interest rate hike since last summer, a quarter-point increase to 0.5%.
Paulson will then leave for South Korea before stopping in China.
China’s huge trade gap with the United States will likely be a focus of talks in Beijing. The US trade deficit with China hit a record $232.5 billion (Rs10,35,699 crore) last year, prompting more calls by Democrats in the US Congress for the Bush administration to do more to deal with the soaring imbalance.
American politicians are also pressuring China to free up controls on the movement of its currency, the yuan.
Critics in Washington say the yuan is artificially undervalued against the dollar and that the difference gives Chinese exports an unfair advantage on the world market.