Japan opens slowly

Press, 30 May 1987, Page 27

Japan opens slowly

By

KENNETH BARRY

of Reuters (through NZPA) Washington Japan has announced limited steps to open its financial markets to foreign firms. The United States and Britain have recently stepped up complaints that their banks and investment companies have been kept out of Japanese financial markets.

Japan’s Vice-Minister of Finance, Mr Toyoo Gyohten, in Washington for talks with U.S. Treasury officials, said foreign banks soon would have greater access to the Japanese bond market, but deregulation in other areas would take longer. “It is important for future development that we have a soft landing in our endeavour to open markets,” Gyohten said.

The American Assistant Treasury Secretary, Mr David Mulford, said at a joint news conference that while the liberalisation was welcome, Japan had done little to reregulate interest rates for the aver-

age Japanese investor.

The result was that its banks were subsidised by the Government and were given an unfair advantage over foreign competitors. Non-Japanese banks had limited access to the large pool of deposits in Japan, Mr Mulford said. He said he was encouraged by the expansion in size of the Euroyen market, permission for U.S. banks to serve as investment advisors in Japan and other liberalisation steps.

But there had been very little progress in allowing markets to determine interest rates for the average investor, he said. As a result, Japan’s economic growth would be less robust, Mr Mulford said. The United States has followed a policy of urging Japan to boost its growth to help correct Japan’s huge trade surplus with the United States.

Mr Gyohten said Japan’s strategy was to deregulate the largest denominations first and leave small deposits to

later. Mr Gyohten said Japan’s 20-year bond soon would be sold by auction instead of through an underwriting syndicate comprised almost entirely of Japanese firms. Japan will also introduce bidding for a portion of 10-year bonds, the denomination with the largest sales. The result will be that 56 per cent of the total bonds issued would be sold by auction. Mr Gyohten was asked about possible U.S.-Japan co-ordinated actions on interest rates. He said any reduction in Japanese rates in response to raising American rates would have to be examined in light of Japan’s economic situation.

He repeated that the issue of greater access to the Tokyo Stock Exchange, which British firms particularly have been seeking, was under study and a decision would be made by the end of the year. But no new members would be added before May, 1988.