WASHINGTON -- The United States and Japan agreed to discuss regulation of financial derivative products in Japan.
U.S. Treasury officials said they are looking to action from Japan to address concerns "that their regulatory practices not deny American firms profit in a sector where they've been extremely innovative and strong."
A senior Treasury official, in a briefing for reporters with Japanese Ministry of Finance officials, said the negotiating framework is part of a general effort by industrial nations to press Japan for movement on key financial services issues. The countries want to conclude the Uruguay Round of the General Agreement on Tariffs and Trade by mid-December.
The United States, along with the 12-nation European Community, is looking for ways to liberalize financial services in Japan, particularly securities underwriting, asset management, cross-border transactions, and banking.
Japanese Minister Raises Concerns
Those issues, according to a senior U.S. Treasury official, were discussed during bilateral meetings in Washington this week with Japanese officials. The participants declined to elaborate on the extent of progress in the talks.
Tadao Chino, Japan's vice minister of finance for international affairs raised concerns about such U.S. issues as state banking regulations, harmonization of state and federal securities laws, and prohibitions on the sale of foreign trust products in the United States.
He said discussions on derivatives "related to trading practices," including "circuit breakers" and position limits that might be required by the Japanese government.
Japan's Finance Ministry, which has been steadily imposing tighter regulations on derivatives trading since Japan's stock market plunged, has been poised to introduce even tighter requirements on position limits.
U.S. investment banks and securities firms fear the regulations would kill their derivatives business in Japan.
Regulations Could Be Put on Hold
The agreement to discuss regulatory issues may indicate that Japan will delay imposing the regulations.
On financial services generally, one official said, "I would anticipate that whatever agreements we reach would be extended to other countries."
No dates have been fixed for follow-up talks, but U.S. officials expect several meetings before July's Group of Seven summit in Tokyo.