Koizumi pledges reform commitment


Koizumi said Monday Bush supported his economic reform policy

Geoff Hiscock
CNN Asia business editor

TOKYO, Japan (CNN) -- Japanese Prime Minister Junichiro Koizumi has pledged that he would not slacken in pursuing his structural reform agenda, and said U.S. President George W. Bush supported his policy.

Koizumi, addressing a press conference after the two leaders finished their meeting in Tokyo, said reform of the Japanese economy was absolutely essential and would continue.

The stock market responded with caution to the Japanese leader's remarks.

The benchmark Nikkei 225 was up just under half a percent to 10,093.25, but the broader Topix index was virtually flat, down 0.8 points to 981.68.

In responding to reporters' questions, Koizumi and Bush both brushed aside criticism that there was little reform to show for the 10 months Koizumi has been in office.

Bush said the Japanese leader had laid down a bold agenda that required him spending considerable political capital.

Koizumi stressed the inter-related nature of regulatory reform steps.

Koizumi is expected to give details by the end of this month on the specific reform measures he will take to tackle deflation and the looming banking crisis.

Fear of deflation

Japan's economy has been struggling to free itself from recession in recent years. Consumers are reluctant to spend, the jobless rate is at a record high, and there is a growing fear that deflation is spiralling out of control.

In particular, an overhaul of Japan's financial system -- where billions of dollars in bad loans threaten to destabilizise many banks -- is seen as a prerequisite to sustained economic growth.

Koizumi said Japan had lost confidence in itself and it was necessary for it to regain that confidence.

"President Bush has shown support and understanding of my policy," Koizumi said.

Bush, for his part, said he was confident of Koizumi's leadership, his economic strategy, and of his desire to implement that strategy.

Asked which element of the reform agenda should be given the greatest weight, Bush said he was in Tokyo to "lend support, not give advice".

'Bedrock' of Pacific stability

The leaders praised each other and refrained from any criticism, despite misgivings from many observers on the glacial pace of Japan's structural reform, and on the implications of Bush's "axis of evil" which groups Iraq, Iran and North Korea.

Bush praised Japan as "one of America's truest and greatest friends" and characterized the U.S.-Japan alliance as the "bedrock" of Pacific stability.

Bush told the news conference that while the U.S. was still in recession, there were signs of recovery.

U.S. recovery is seen as essential to a return to global growth this year. Most analysts are now predicting the U.S. economy will start to pick up momentum in the second half of 2002.

But there is less confidence about Japan's ability to break out of its recession. The outlook for 2002 is that Japanese gross domestic production will shrink by about 1 percent.