The Japanese prime minister, Mr Ryutaro Hashimoto, under the gun at home and abroad over his economic policies, will seek to shift world leaders' attention this week to new moves he wants to take to solve Japan's massive bad loan problem.
Having apparently quelled previous calls for Tokyo to make permanent tax cuts to boost the flagging economy, Mr Hashimoto - by the accounts of senior members of his party - will try to win the support of US and other leaders at meetings in Birmingham for his efforts on bad loans and on further deregulating the economy.
"I think Mr Hashimoto will explain the recent comprehensive economic package, maybe with a focus on his determination to deal with the bad loan problem," when he meets President Clinton on the sidelines of the May 15th-17th Group of Eight summit, said Mr Koichi Kato, secretary-general of the premier's ruling Liberal Democratic Party.
Mr Kato, at a news conference during a visit to Washington last week, said that in addition to the 16.65 trillion yen ($125 billion) stimulus plan, Mr Hashimoto and Mr Clinton will also discuss Japanese deregulation and Tokyo's "Big Bang" financial reforms.
Mr Kato and other top LDP lawmakers, in visits to Washington and New York over the past two weeks, made clear they cannot start considering permanent tax cuts until midsummer but vowed energetic action on the other fronts.
The United States, after repeated hints that it wanted more fiscal steps, such as permanent tax cuts, appears ready to give the other measures a chance.
"I think they've done all they're going to" on the fiscal stimulus side, a senior US official said. As for new measures, Mr Kato said, "The biggest point now is really the non-performing asset problem." The bad loan mess, a hangover from the bursting of the late 1980s "bubble" economy, is also an area of concern Washington and other nervous Japan-watchers.
Mr Kato said he told the US Deputy Treasury Secretary Mr Lawrence Summers that after returning to Tokyo he would have the LDP set up a special committee to consider establishing tax-exempt write-offs for clearing the bad loans from the balance sheets of the nation's banks.
On deregulation, where Tokyo continues to face criticism from the Office of the US Trade Representative and other quarters, Japan got some unlikely help from the US envoy to Tokyo, Mr Thomas Foley.
"I think the president and the prime minister will announce a very positive package in Birmingham," Mr Foley said during a trip to Washington last week.
At a London meeting on Saturday preparing for the summit, finance ministers from the Group of Seven - Britain, Canada, France, Germany, Italy, Japan and the US - welcomed the stimulus plan but called for its swift implementation and for steps to strengthen the Japanese financial system.
Mr Kato and policy chief Taku Yamasaki, in visits to Washington and New York over the past two weeks, stressed that Mr Hashimoto will push to get a supplementary budget, to pay for the stimulus, and a revised fiscal reform bill, to allow the government to cut taxes, through parliament before the current session ends next month.
