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No. 40 — October 23, 1998

 

Feature Article

U.S.-JAPAN MARITIME RELATIONS:
THE VIEW FROM THE FEDERAL MARITIME COMMISSION

Interview With The Honorable Harold J. Creel Jr.,
Chairman, Federal Maritime Commission

Summary

Washington and Tokyo often have been at loggerheads over the huge volume of trade between the United States and Japan. Disputes also have erupted over the business mainly responsible for moving products back and forth across the Pacific: the maritime shipping industry. Late last year, the Federal Maritime Commission threatened to bring transpacific trade to a halt because Tokyo had failed to satisfy Washington's complaints about Japanese port practices. FMC Chairman Harold J. Creel Jr. recently discussed this and other U.S.-Japan maritime issues with JEI Senior Economist Jon Choy. Mr. Creel indicated that he saw only small signs of progress by Tokyo toward alleviating Washington's concerns. He warned that sanctions could be reimposed at any time.

Chairman of the Federal Maritime Commission since 1996, Harold J. Creel Jr. has served on the commission since 1994 and recently was nominated to a second five-year term. From 1989 to 1994, he was senior counsel to the Merchant Marine Subcommittee of the Senate Committee on Commerce, Science and Transportation. As a lawyer for the National Oceanic and Atmospheric Administration of the Department of Commerce prior to his Commerce Committee appointment, he acted as chief staff attorney on issues pertaining to endangered marine species and wrote, negotiated and reviewed regulations implementing NOAA's legal authority.

The Appendix provides an overview of the FMC's history, organization and functions. It also contains a summary of the Ocean Shipping Reform Act, a description of how transpacific shipping is organized and a glossary of industry terms.

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Weekly Review

CENTRAL BANKS ADJUST MONETARY POLICY TO GLOBAL TURMOIL by Douglas Ostrom

The Federal Reserve Board's surprise October 15 announcement that it was guiding interest rates another quarter of a percentage point lower clearly was a response to growing economic uncertainties in Asia, Russia and Latin America. Coming as it did between Federal Open Market Committee meetings, usually occasions for changes in policy, the action got more than the customary attention from market participants and sent equity markets from Singapore to Sao Paulo soaring, at least temporarily. The Tokyo stock market was no exception, with the Nikkei average climbing 6.3 percent in the first three trading days following the announcement.

 

JAPANESE FINANCIAL INSTITUTIONS SEEK SAFETY IN ALLIANCES, RETRENCHMENT by Jon Choy

Many analysts have argued that one problem facing Japan's financial markets is that too many firms are competing for the same business. Particularly in light of the prolonged economic slowdown, reduced expectations for future growth and the ongoing Big Bang of deregulation, these observers say that the only way to bring the supply of financial services back into line with demand is to let the market winnow out inefficient companies. Somewhat paradoxically, the same people also argue that because foreign financial services providers have greater expertise and are more innovative, new offshore firms are needed in Japan's markets. This particular form of gaiatsu (foreign pressure) could be the spur that gets plodding Japanese financial markets to move at the faster pace of global finance.

 

DIET CLEARS CONTROVERSIAL JNR DEBT REPAYMENT PLAN by Jon Choy

Over the protests of the seven direct descendants of the former Japanese National Railways, the Diet approved legislation October 15 that sets in motion a 60-year plan to pay off the ¥27.8 trillion ($205.9 billion at ¥135=$1.00) worth of debt that remains from JNR's 1987 privatization. Although Tokyo will shoulder most of the debt, the seven rail companies created from the now-defunct government railroad will be forced to take on ¥180 billion ($1.3 billion) worth of unfunded pension liabilities owed to former JNR workers now employed by them. The repayment plan has caught the attention of American shareholders of three Japan Railway firms as well as some U.S. legislators.

 

TOKYO, MOSCOW REAFFIRM PEACE TREATY GOAL DESPITE ECONOMIC, POLITICAL UNCERTAINTIES by Barbara Wanner

In an effort to maintain momentum in bilateral affairs against a backdrop of domestic political shifts and economic problems, Japan and Russia reaffirmed October 17 that they will strive to sign a peace treaty by 2000. The joint statement, issued after Foreign Minister Masahiko Komura's October 16-18 meetings in Moscow with Prime Minister Yevgeny Primakov and Foreign Minister Igor Ivanov, said that President Boris Yeltsin would respond formally to Tokyo's most recent proposal to resolve a long-standing territorial dispute during Prime Minister Keizo Obuchi's November 10-13 visit to the Russian capital.

 

TOKYO MAY INCREASE ASIAN AID; CONGRESS PASSES IMF FUNDING by Eric Altbach

Responding to a growing international consensus on the seriousness of the threats facing the world economy, both Tokyo and Washington have signaled a renewed commitment to avoid a global meltdown. Finance Minister Kiichi Miyazawa, meeting with Thai counterpart Tarrin Nimmanahaeminda in Tokyo October 20, reiterated that Japan would provide additional aid to Thailand and other economically troubled East Asian countries. Vice Finance Minister for International Affairs Eisuke Sakakibara even suggested that Tokyo would increase its financial aid program beyond the $30 billion pledged for the Miyazawa Plan at the early October meeting of Group of Seven finance ministers and central bankers.

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