March 14, 2001
Fearing a Link to Japan Woes, Bush Advisers
Ponder a Policy
By DAVID E. SANGER
ASHINGTON, March 13 —
President Bush's economic advisers,
in meetings at the Treasury, the Federal
Reserve and the White House, are grappling
with the implications of the recent political and
economic distress in Japan, fearing it could
worsen the slowdown here and in Asia.
Mr. Bush and his aides came to office highly
critical of the Clinton administration's dealings
with Japan — particularly its public criticism of
the country's economic management — and
they promised they would not lecture the
Japanese in public about economic strategy. So
far, they have held to that promise.
But in recent days they have begun private
meetings on the subject, at which several
officials have expressed concern about what
one senior aide called the "scary dynamic"
under way between the world's two largest
economies.
"The downturn here feeds the pessimism in
Japan," the official said, because it is clear that
the United States will not be buying as many
Japanese goods in the coming year. "And the
faster Japan drops, the more it undermines
confidence here."
While there is debate over how much Japan's
stock declines influence declines here, and vice
versa, market analysts who watch both New
York and Tokyo note that in the month of
March Japanese companies often liquidate
holdings in the United States. The proceeds
are sent back to Tokyo to help bolster balance sheets before the close of the fiscal year for Japanese corporations, on March 31. The result is that Japanese investors who might otherwise keep assets here to take advantage of the stronger dollar, are joining the selling.
Several Bush administration officials said that they were without the main weapon the Clinton administration used to contain the Asian economic crisis three years ago: a booming American economy that soaked up imports and provided liquidity to plunging markets in Asia.
The current troubles in Japan, which include the lack of huge government spending to stimulate the economy, the inability of regulators to clean up a banking system sinking in bad real estate loans and growing political disarray, are quite different from the currency crisis in Southeast Asia that began in 1997 and spread around the globe.
Nonetheless, it has been a long time since the United States and Japan, which together account for roughly 40 percent of the world's gross domestic product, were headed for zero growth at the same time. So an administration that has yet to put its economic team fully in place is trying to assess the risks to a world economy that cannot turn to a single engine of economic growth.
So far the White House has said nothing in public about Japan's simultaneous economic and political meltdowns. Mr. Bush's spokesman, Ari Fleischer, ducked a series of questions on the subject today, falling back on familiar bromides about the strength of the United States- Japan alliance.
But the White House cannot stay mute for long. Prime Minister Yoshiro Mori, barely surviving in office, will be at the White House on Monday for a meeting with President Bush.
"They know the reforms they have to make, and I'm not going to lecture them," Mr.Bush's chief economic adviser, Lawrence B. Lindsey, said in an interview today. "There are many talented people in the Japanese government, and they know the right things to do. I think their views will prevail."