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'Japan has done its job to support economy'

TOKYO: Japan's government has done its job in supporting the economy and now expects the private sector to take over, Finance Minister Kiichi Miyazawa told Germany on Saturday, an official said.

Tokyo "has done what we should do and is now waiting for growth in consumer spending and (private) capital investment," he told German Finance Minister Hans Eichel, according to a Japanese finance ministry official.

The Japanese and German ministers spoke for 30 minutes just ahead of a meeting of the Group of Seven finance ministers and central bank governors in Tokyo.

In the past two years alone, Japan has forked out about 58 trillion yen (552 billion dollars) in extra state spending to stimulate the world's second-biggest economy.

But the private sector is yet to show signs of a full recovery. Miyazawa defended the Japanese ruling coalition's decision to delay by one year the introduction of a system that would limit repayment of deposits if a bank fails.

The decision has been condemned by critics as a sign of backtracking on tough economic reform in a year when the government must face a general election by October 20.

The Japanese authorities had planned to introduce in April 2001 the system to limit guaranteed repayments for depositors 10 million yen (95,200 dollars) per account in the event of a financial institution collapsing.

But last month policy-making officials from the three ruling parties decided to put off the scheme by one year saying the finance sector still had "some points to be improved" before removing full protection.

"We need more time to check small and medium-sized financial institutions," Miyazawa told the German finance minister, adding the delay was a once-only postponement and was for just one year.

Eichel in turn said the Germany "understands the economic stimulus measures Japan has been implementing and hopes they will lead to the recovery of the private-sector economy," the Japanese official said.

The German economy was growing and there was "little concern over inflation," Eichel was quoted as saying.

The Japanese and German ministers did not discuss foreign exchange rates or the question of who will succeed Michel Camdessus as the head of the International Monetary Fund, the official said.

Before meeting Miyazawa, Eichel told reporters he saw no need for the G7 nations to take a common position on the strength of the yen of weakness of the euro.

"On the one hand I understand the Japanese position but on the other I think intervention that goes against economic fundamentals does not have much effect," he told journalists.ÑAFP