[House Report 105-607]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-607
HOUSE OF REPRESENTATIVES
2d Session Part 1
_______________________________________________________________________
RELATING TO THE IMPORTANCE OF JAPANESE-AMERICAN RELATIONS AND THE
URGENT NEED FOR JAPAN TO MORE EFFECTIVELY ADDRESS ITS ECONOMIC AND
FINANCIAL PROBLEMS AND OPEN ITS MARKETS BY ELIMINATING INFORMAL
BARRIERS TO TRADE AND INVESTMENT, THEREBY MAKING A MORE EFFECTIVE
CONTRIBUTION TO LEADING THE ASIAN REGION OUT OF ITS CURRENT FINANCIAL
CRISIS, INSURING AGAINST A GLOBAL RECESSION, AND REINFORCING REGIONAL
STABILITY AND SECURITY
_______
June 25, 1998.--Ordered to be printed
_______________________________________________________________________
Mr. Gilman, from the Committee on International Relations, submitted
the following
R E P O R T
[To accompany H. Res. 392]
The Committee on International Relations, to whom was
referred the resolution (H. Res. 392) relating to the
importance of Japanese-American relations and the urgent need
for Japan to more effectively address its economic and
financial problems and open its markets by eliminating informal
barriers to trade and investment, thereby making a more
effective contribution to leading the Asian region out of its
current financial crisis, insuring against a global recession,
and reinforcing regional stability and security, having
considered the same, report favorably thereon with amendments
and recommend that the resolution as amended be agreed to.
The amendments are as follows:
Strike out all after the resolving clause and insert in
lieu thereof the following:
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 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.
Amend the preamble to read as follows:
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's threatens the
foundation of Asia 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 countries, South Korea,
Thailand, and Indonesia, totaling $19,000,000,000, and its substantial
structure 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 Japanese yen against the United
States dollar and therefore stimulated a rapid expansion of exports and
a fast-growing 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 the 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
background and purpose
The purpose of House Resolution 392 is to emphasize the
importance of U.S-Japanese relations to stress the urgent need
for Japan to more effectively address its economic and
financial problems and open its markets by eliminating informal
barriers to trade and investment. The Committee believes that
Japan plays a crucial stabilizing role in the Asia-Pacific
region and that it must make a more effective contribution to
leading the Asia-Pacific region out of its current financial
crisis, insuring against global recession, and reinforcing
regional stability and security.
The Committee notes that Japan has generously contributed
second line credits totaling $19 billion to the three
International Monetary Fund program countries, South Korea,
Thailand, and Indonesia. Nevertheless, the Committee believes
that Japan should more directly help the ailing Asian economies
by opening its markets, deregulating its economy, eliminating
barriers to trade, fixing its financial sector, adopting
permanent tax cuts, and strengthening the yen.
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.'' The United States' response to the
Mexican crisis is a good example of how Japan could jointly
serve with the United States and Europe as the ``engine of
growth'' for Korea, Thailand, and Indonesia. Regrettably, the
Committee notes that Japan is slipping back into a recession or
potential depression, with zero growth likely for 1998,
followed by as much as a negative two percent contraction in
1999. If these projections are correct, Japan's imports from
the United States and other countries in the Asia-Pacific
region will not grow sufficiently, and Korea, Thailand, and
Indonesia will be force to rely more heavily on exports to the
United States for growth.
These weak economic fundamentals in Japan, coupled with a
robust United States economy, have already weakened the value
of the Japanese yen and therefore stimulated a rapid expansion
of exports and a fast-growing merchandise trade surplus with
the United States, which increased from $48 billion in 1996 to
$55 billion in 1997. Although the United States was able to
almost unilaterally absorb Mexico's imports after the peso
crisis, the United States cannot absorb all of the additional
imports from the Asia-Pacific region stemming from the
financial crisis.
For example, the Committee notes that the United States-
Japan trade deficit stood at $15.4 billion for the first
quarter of 1998. This was a 17% increase over the first quarter
of 1997. More importantly, Japan's imports from other Asian
countries are significantly down. For example, over a period
from December 1997 to January 1998, Japanese imports from
Indonesia were down 17%, Thailand 5.9%, Malaysia 13.6%, Hong
Kong 5%, Taiwan 12.1%, and South Korea 2.5%.
The Committee also notes that the recent sharp depreciation
of the Japanese yen against the dollar could prolong and even
contribute to a second wave of the Asian financial crisis.
Leaders from China, Hong Kong, Taiwan, Thailand and Singapore
have called on Japan to reverse the yen's fall, which they say
is damaging their own currencies. Concerns about Japan's
recession and potential depression have caused United States
stock markets to precipitously decline. The committee further
notes that a weak Japanese yen threatens to undermine the
ability of Indonesia, Thailand, and Korea to export their way
back to health from the Asian financial crisis.
committee action
H. Res. 392 was introduced by Representative Bereuter on
March 24, 1998. The Subcommittee on Asia and the Pacific marked
up the bill up on May 14, 1998, and ordered it reported
favorably to the Full Committee. The Full Committee marked up
the bill in open session, pursuant to notice, on June 5.
At that time, an amendment in the nature of a substitute
was offered by Mr. Bereuter. It was adopted by voice vote. The
Committee then ordered the resolution reported by voice vote.
rollcall votes on amendments
In Compliance with clause (2)(l)(2)(B) of rule XI of the
Rules of the House of Representatives, the record of committee
rollcall votes on final passage or amendments during the
committee's consideration of H. Con. Res. 392 is set out below:
No rollcall votes were taken during the consideration of this
measure or on the question of reporting it out.
committee oversight findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
the findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X on the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
committee on government reform and oversight findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
jurisdictional Issues
On introduction, the bill was referred by the Speaker to
the Committee on International Relations, and in addition to
the Committees on Banking and Financial Services, and Ways and
Means, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned.