PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | CLIPS | 2001 | LOBBY URGES JAPAN REFORM

INTERVIEW: Lobby Urges Japan Reform, Not Devaluation James T. Areddy Dow Jones Newswires/The Wall Street Journal Tuesday, June 19, 2001 HONG KONG -- The Pacific Basin Economic Council, an international business group, hopes Japanese Prime Minister Junichiro Koizumi will force reform, but worries the government may simply lean on the yen. Robert Lees, secretary general of the Honolulu-based group, told Dow Jones Newswires recently that he believes Koizumi has enough public support to shake up the bureaucracy, lower taxes and otherwise improve Japanese consumer confidence. "You've got a guy right now who has a mandate. If he turns out to be just another Liberal Democratic Party product, that's going to be the ultimate letdown," Lees said. Indeed, Lees, whose organization represents about 1,100 businesses from around the Asia-Pacific region, said a recent trip to Tokyo underscored his concerns that reform mightn't amount to much. Most worrying, he said, were officials around the prime minister who told Lees they are sympathetic to a "mercantilist" policy option of reviving the economy by forcing the yen lower. Some in Japan want the yen to weaken, so as to help exports and reflate the economy. But Lees said he advocates strong-armed foreign pressure to ensure Japan resists that "same old ploy," since the country's economic challenges are domestic and won't be corrected with more competitive exports. "Japan continues to get an incredible free ride as a developed country," Lees said. "They're now causing problems, competition wise, with their neighbors, and that's not fair," Lees said. In recent days, he has also met with officials in Southeast Asia. He said a sharp fall in the yen would be devastating for the rest of Asia, and the chance it could spark a devaluation in the Chinese currency makes the issue a global concern. "There's a point at which the camel's back is broken and the renminbi is devalued, and I don't even want to think about the consequences of that," Lees said. He said a Chinese devaluation would force down currencies throughout the world's emerging economies, and spark inflation in those countries. "That would mean humongous trade deficits for the developed countries...and the bashing begins," Lees said. In other words, closed markets would result, and global trade would slow. One of PBEC's key missions is to press for trade liberalization, and Lees said he is confident a new round of global talks will be launched in November at the World Trade Organization's ministerial meeting in Qatar. He acknowledged that he doesn't see where the push for new trade talks will emerge. And he agrees that developed and developing countries stand far apart over whether to incorporate labor and environmental issues into trade talks. But as a supporter of the Republican Party in the U.S., Lees said has confidence in the skills of U.S. Trade Representative Robert Zoellick to get a deal off the ground. "Bob is much more of a diplomat, and will be much more sensitive to the needs of developed countries than his predecessor was." PBEC draws its membership from companies in 20 Asia-Pacific countries, including the U.S., Japan, China and Latin America. It often functions alongside the 21-country Asia Pacific Economic Cooperation forum, a political and trade grouping that will host a summit in Shanghai later this year.