H. Res. 392

In the House of Representatives, U.S.,

July 20, 1998.

Whereas the maintenance and improvement of a very positive

international relationship between the United States and

Japan is vital to the two countries and to the entire global economic and trading system;

Whereas the United States-Japan Security Alliance and close

economic cooperation have underpinned the security, stability, and prosperity of the Asia-Pacific region, thereby

allowing that region to enjoy unmatched economic growth

and development for nearly three decades;

Whereas the current financial crisis in Asia threatens the

foundation of Asia’s unmatched peace and prosperity, the

stability of the global economic system, and related vital

American security and economic interests;

Whereas, although the Government of Japan’s

$128,000,000,000 economic stimulus and tax reduction

package of April 24, 1998, includes numerous provisions

designed to promote consumer spending and industrial

growth, it is by no means clear that these measures will

restore economic growth or will be targeted at the most

productive sectors of the economy;

Whereas Japan’s generous contributions to second line credits for the three International Monetary Fund program
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countries, South Korea, Thailand, and Indonesia, totaling

$19,000,000,000, and its substantial structural adjustment loans and export credits to Indonesia, have helped

contain the financial crisis, but are an inadequate alternative to a strong Japanese economy;

Whereas Japan accounts for three-fourths of the total East

Asian Gross Domestic Product and therefore has the potential to help pull the region out of the financial crisis

by serving as its ‘‘engine of growth’’, just as the United

States, by being an ‘‘engine of growth’’ and having open

markets, earlier assisted Mexico emerge from a substantial financial crisis;

Whereas a further weakening of the yen could trigger a

round of competitive devaluations among Japan’s Asian

neighbors;

Whereas deteriorating economic conditions and ongoing financial market turbulence in Asia make it increasingly

important that Japan play a leadership role in helping to

restore confidence in the economic future of the region;

Whereas that regional leadership role coincides with Japan’s

stated goal of promoting strong domestic demand-led

growth and avoiding a significant increase in its external

trade surplus;

Whereas Japan’s continued economic stagnation depresses

the level of its imports from the United States and other

countries in the Asia-Pacific region, thereby forcing its

neighbors in the region to rely more heavily on their exports to the United States for growth;

Whereas weakened economic fundamentals in Japan and an

accommodative monetary policy, coupled with a robust

United States economy, have weakened the value of the
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Japanese yen against the United States dollar and therefore stimulated a rapid expansion of exports and a fastgrowing merchandise trade surplus with the United

States, which increased from $48,000,000,000 in 1996 to

$55,000,000,000 in 1997;

Whereas the bursting of Japan’s investment bubble in 1991

has been accompanied by protracted asset-price and balance sheet adjustments by Japanese financial institutions, leading to a scarcity of credit and weak growth;

Whereas policies favoring low interest rates had encouraged,

until recently, excessive private sector lending to overly

indebted enterprises in Indonesia, Korea, and Thailand,

and thereby contributed to the private debt crisis in the

region;

Whereas past efforts to stimulate recovery through deficit

spending targeted at the construction sector have proved

inadequate and failed to accomplish their desired objectives;

Whereas inadequate deregulation initiatives have failed to restore vitality to the Japanese economy, while truly significant deregulation could add as much as a percentage

point or more to Japanese economic growth; and

Whereas the continued failure of the Government of Japan

to properly recognize and remedy the aforementioned

policies will both prolong the Asian financial crisis and

contribute to the inevitable rise in the American trade

deficit with Japan, thereby potentially undermining

American domestic support for close economic, political,

and security cooperation and coordination between the

United States and Japan at a critical point in history:

Now, therefore, be it
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Resolved, That it is the sense of the House of Representatives that Japan should urgently undertake the following

steps to enhance alliance cooperation and raise Japan to the

position of regional partnership that it should enjoy by virtue

of its economic size, technological achievements and its democratic political system:

(1) Undertake a broader and faster deregulation of

its economy, in order to improve long-term growth prospects and promote opportunities for foreign firms, improve transparency and disclosure, reward innovation

and competition, and reduce systemic risk.

(2) Further open its distribution system to eliminate exclusionary and discriminatory business practices

that are not only limiting imports but stifling economic

growth and competition in Japan.

(3) Fully honor and implement its bilateral trade

agreements with the United States as well as its multilateral trade commitments.

(4) Take other aggressive steps to reduce numerous

barriers to imports and foreign investment and seek to

lower its current account surplus to 2 percent or less of

gross domestic product.

(5) Move promptly to dispose of nonperforming

bank loans by disposing of nonperforming real estate
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and other loans and by allowing the market to determine

the real value of these assets and loans.

(6) Take immediate steps to address systemic problems in the banking system, close insolvent banks, and

recapitalize weaker banks with banks that have strong

fundamentals and good management.

(7) Address its fiscal problems in a manner that

does not jeopardize economic recovery, with an emphasis

on significant and meaningful tax cuts and a comprehensive stimulus package that restores economic confidence

and avoids the traditional sectorally-oriented approach of

the past.

(8) Adopt all appropriate policies to strengthen the

Japanese yen.

Attest:

Clerk.