Japanese Prime Minister Junichiro Koizumi and US Treasury Secretary John Snow didn't discuss the issue of China's currency or the dollar-yen exchange rate, a Finance Ministry official said.
During the 35-minute meeting, which Finance Minister Masajuro Shiokawa also attended, Snow said that US growth will strengthen later this year thanks to tax cuts, according to the official who attended the meeting and declined to be named under their briefing rule.
Snow also said the disposal of Japanese banks' bad loans will help Japan overcome deflation, the official said.
At a later meeting with Snow, Japan's Chief Cabinet Secretary Yasuo Fukuda told the US Treasury Secretary that if China allows the yuan to strengthen, that would help to accelerate the country's economic expansion. Fukuda also said he thinks it's necessary for a variety of countries to discuss this issue, the finance ministry official said.
Snow is on a visit to Tokyo before attending a meeting of APEC finance ministers on Thursday and Friday in Thailand.
He today also met Financial Services Minister Heizo Takenaka and Bank of Japan Governor Toshihiko Fukui.
But Snow refrained from any direct statement on the dollar/yen or the loosening of China's yuan/dollar peg in meetings with Japa-nese leaders Monday, according to Japanese officials.
The issue of the Chinese currency was raised, however, when Snow met with the chairman of the powerful Japan Business Federation, or Nippon Keidanren, lobby, who asked what Snow thought of increasing the value of the yuan.
"Mr. Snow said jokingly `my opinion is the same as yours,'" according to an official who was present at Snow's meeting with Hiroshi Okuda, Keidanren's head, who is also chairman of auto giant Toyota.
"It is a very complex issue and there is no easy answer to that," Snow told Okuda, according to the official.
Snow said he hoped for a high degree of "flexibility" on the part of the Chinese authorities on a variety of issues including trade, regulations on investment and foreign exchange, according to the official.
The currency markets were anxiously awaiting the outcome of a news conference to be held by Snow after these meetings, dealers said.
"We expect Snow to publicly praise Japan's efforts to boost growth and to reaffirm his tolerance of Japan's intervention [in the market]," said Deutsche Bank currency strategist Marshall Gittler in a research note. "That should boost dollar/yen somewhat."
US criticism of Japanese intervention on the other hand, "would result in a plunge," Gittler said.
On Friday, Japan's finance ministry said it did not intervene in the market from July 30 through August 27 despite repeatedly warning it would do so to prevent the yen's sudden rise, which it fears will harm the competitiveness of the nation's exporters.
Snow reportedly discussed during a breakfast meeting with lawmakers from the ruling Liberal Democratic Party (LDP) the need to allow the yuan to strengthen from its peg of around 8.28 to the dollar so as to trim China's trade imbalances with the world.
Five LDP lawmakers, including policy chief Taro Aso, urged Snow to take up the yuan peg at the upcoming APEC forum to be held in Thailand, Kyodo News reported.
Snow said he was aware the issue needed to be dealt with, it added.
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