FROM THE OFFICE OF PUBLIC AFFAIRS

I have had a useful set of meetings today here in Tokyo. Let megive you just a brief summary of what we discussed.

Inmy meetings with Finance Minister Mitsuzuka, Central BankGovernor Matsushita, and other senior officials, we discussed thecurrent outlook for the Japanese economy and macroeconomicpolicy. I expressed our desire that Japan pursue a supportivemacroeconomic policy stance necessary to promote a strongrecovery led domestic demand and to prevent a resurgence inJapan's external surplus.

Therestoration of domestic demand-led growth depends on threefactors. First, the macroeconomic policy framework should be onethat instills confidence in the Japanese economy and its abilityto generate a recovery in domestic demand. Second, it requiresthe monitoring and implementation of structural liberalizationmeasures that help to create private investment, anotherimportant engine of demand. Finally, promoting domestic demandmeans working to repair the problems in the Japanese financialsystem as quickly as possible.

Inour conversation, Minister of Finance Mitsuzuka made it clearthat the Japanese Government shared these objectives and hecommitted to take measures as necessary to ensure a strongdomestic demand-led recovery and avoid a significant increase inexternal imbalances. We welcome this commitment.

Wealso discussed the Japanese authorities' plans for deregulationand liberalization of the financial system. The U.S. interest inthe prospective Big Bang lies in three broad areas:

--Expandingopportunities for competition;

--Promotinggreater transparency and disclosure; and

--SeeingJapan create a stronger and more dynamic financial system.

Iurged the Japanese authorities to move ahead quickly to clarifythe specifics of the financial deregulation program and toimplement these measures as soon as possible, so that marketparticipants can begin the process of adjustment. The TreasuryDepartment and Ministry of Finance will spend a full day tomorrowin the first of an ongoing series of discussions on the financialderegulation program.

Finally,today I also had a series of meetings with finance, monetary andcentral bank officials from five of the large, outward-lookingAsian economies. This was a useful opportunity for us to discussmacroeconomic and financial market developments in our countries,as well as the common challenges we face in building strongfinancial systems and capital markets. We agreed to cooperate asnecessary in these areas going forward. The participants alsotook note of the upcoming transition in Hong Kong. We all agreedon the absolute importance of the free flow of information, aswell as the integrity and professionalism of regulation, to ahealthy transition.