[Congressional Record Volume 140, Number 145 (Friday, October 7, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 7, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                       JAPANESE FINANCIAL MARKETS

 Mr. DASCHLE. Mr. President, as we evaluate the results of the 
recent negotiations with Japan and take up the Uruguay round 
implementing legislation, our focus will understandably be drawn to 
more traditional trade concerns. Nevertheless, international financial 
issues can have as significant, if not more significant, an impact upon 
our economy as these trade agreements and should not be overlooked.
  Over the course of the 1980's, Japan quietly had become a leading 
creditor nation, a major player in United States domestic public and 
private debt markets, and a significant factor in American commercial 
real estate. Thus, when reports of financial scandals, collapsing stock 
and real estate markets, and a banking crisis in Japan raised 
legitimate concerns within United States financial circles several 
years ago, I introduced legislation that directed the Treasury 
Department to report to Congress the results of a study of Japanese 
financial markets and their implications for the United States. Given 
that financial dislocations in Japan could not help but have an impact 
on the United States, it seemed to me that the findings of this study 
would help the administration and Congress base policy in this area on 
a solid foundation of knowledge and understanding.
  Events since the introduction of that bill have affirmed the 
importance of these issues. Japanese banks remain mired in problems 
comparable to the American savings and loan debacle. The Japanese real 
estate market has not recovered from its collapse. The Japanese stock 
market index hovers around one-half of its 1989 peak. And reform 
initiatives falter under political upheaval.
  Meanwhile, American investment in Japanese securities has increased 
markedly over the past year. Among the leading investors are American 
pension funds and mutual funds.
  Continuing Japanese financial difficulties and the importance of the 
economic relationship between Japan and the United States serve to 
reinforce the need for a comprehensive study of Japan's financial 
markets. Although the Senate likely will not be in session when the 
Treasury report is issued later this year, I would ask my colleagues--
as well as the relevant officials in the White House, the Treasury 
Department, the United States Trade Representative's office, the 
Securities and Exchange Commission, and other executive branch 
agencies--to do some homework on Japan's financial problems while 
Congress is in recess.
  First, I would encourage my colleagues and administration officials 
to take a moment to review Treasury's conclusions when they receive 
this important study. Second, I raise for consideration alongside the 
Treasury report five proposals for reform of the Japanese financial 
martets offered by a leading critic of Japanese financial practices. 
Ideas such as these, as well as the results of Treasury's study, could 
guide us in formulating United States objectives in future negotiations 
with Japan.
  If adopted, these proposal reforms could help ensure that American 
investors enjoy adequate rights and protections for their investments 
in Japan. Three of the proposals would encourage Japanese stock market 
reform that would make that market more responsive to the forces of 
supply and demand. Specifically, they seek to: First, foster more 
competition in the Japanese brokerage industry; second, improve 
Japanese enforcement of existing securities and consumer laws in the 
securities industry; and third, encourage greater liquidity standards 
for continued listing of a stock on the exchange.
  The reform proposals also would address the rights of American 
shareholders in Japanese corporations. With the increase in American 
investment in Japanese stocks, the proposals seek to ensure that 
American shareholders will enjoy adequate rights to participate in the 
management of Japanese corporations.
  Finally, the proposals suggest reforms to the Japanese legal system 
to ensure that foreign investors can obtain fair and impartial 
arbitration of disputes with Japanese institutions.
  These proposals attempt to address concerns about Japanese financial 
practices raised by events of the past few years. But, if adopted, 
their impact could reach beyond financial practices and help break down 
structural barriers that the United States has been attempting to 
address in other ways.
  For example, United States manufacturers have complained about close 
intercorporate relationships in Japan as barriers to penetrating the 
Japanese market. It is my understanding that these kinds of 
relationships are often premised, at least in part, upon cross-
shareholding relationships. One way to loosen those bonds, and the 
commercial linkages they foster, is through reform of the Japanese 
stock market,
  I look forward to the opportunity to review the Treasury Department's 
report and hope that the next Congress will take a serious and timely 
look at the issues it raises. In the meantime, I would encourage my 
colleagues and our trade negotiators to consider the Treasury study and 
these reform proposals. I believe that they contribute to our efforts 
to strengthen policymaking on these vital issues.

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