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Japan Alarmed Over U.S. Debt Crisis Japan Alarmed Over U.S. Debt Crisis
(about 2 hours later)
TOKYO — Japan’s finance minister urged the United States on Tuesday to avoid a default that could cast the global economy into turmoil and hurt the value of Japan’s enormous holdings of United States Treasury bonds, a day after similar warnings from China, which has an even larger stake in American debt.TOKYO — Japan’s finance minister urged the United States on Tuesday to avoid a default that could cast the global economy into turmoil and hurt the value of Japan’s enormous holdings of United States Treasury bonds, a day after similar warnings from China, which has an even larger stake in American debt.
China and Japan, the two largest foreign creditors of the United States, are growing increasingly worried over the potential economic and political fallout if American leaders are unable to strike a deal to lift the debt ceiling from its current $16.7 trillion, raising the prospect of an unprecedented default and disrupted financial markets. China and Japan, the two largest foreign creditors of the United States, are growing increasingly worried over the potential economic and political fallout if American leaders are unable to strike a deal to lift the debt ceiling from its current $16.7 trillion, raising the prospect of a default and disrupted financial markets.
“The U.S. must avoid a situation where it cannot pay, and its triple-A rating plunges all of a sudden,” the Japanese minister, Taro Aso, was quoted as saying by Reuters. “The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis.” “The U.S. must avoid a situation where it cannot pay, and its triple-A ranking plunges all of a sudden,” the Japanese finance minister, Taro Aso, was quoted as saying by Reuters. “The U.S. must be fully aware that if that happens, the U.S. would fall into fiscal crisis.”
Japan holds $1.14 trillion in United States Treasuries, second only to China’s $1.28 trillion, according to the Treasury Department.Japan holds $1.14 trillion in United States Treasuries, second only to China’s $1.28 trillion, according to the Treasury Department.
On Monday, in China’s first comments on the government shutdown and debt-ceiling battle in Washington, Vice Finance Minister Zhu Guangyao said that he had contacted Washington. According to Reuters, he said the United States had the “responsibility” to avoid a fiscal cliff and that China had asked the United States to “earnestly take steps” to prevent default, “to ensure safety of Chinese investments in the United States and the global economic recovery.” On Monday, in China’s first comments on the government shutdown and debt-ceiling battle in Washington, Vice Finance Minister Zhu Guangyao said that he had contacted Washington. According to Reuters, he said that the United States had the “responsibility” to avoid a debt crisis and that China had asked the United States to “earnestly” take steps to prevent default, “to ensure safety of Chinese investments in the United States and the global economic recovery.”
Mr. Zhu pointed out that despite negotiations among American politicians over the fiscal cliff in 2011, one agency, Standard & Poor’s, downgraded its triple-A rating for United States Treasury securities. “We hope that the U.S. can draw lessons from history,” he said. Mr. Zhu pointed out that despite negotiations among American politicians in 2011, one agency, Standard & Poor’s, downgraded its triple-A rating for United States Treasury securities. “We hope that the U.S. can draw lessons from history,” he said.
For Japanese leaders, the paralysis in Washington creates a new political risk, raising the specter of a diminished American presence in the Asia-Pacific region at a time of intensifying territorial disputes and fears of China’s rise. And an American fiscal crisis holds a particular risk for Japan’s popular prime minister, Shinzo Abe. The economic recovery he has so painstakingly engineered depends on a weak yen, which may rise again in value if spooked investors begin dumping American dollars. For Japanese leaders, the paralysis in Washington creates a new political risk, raising the specter of a diminished American presence in the Asia-Pacific region at a time of intensifying territorial disputes and fears of China’s rise. And an American fiscal crisis holds a particular risk for Japan’s popular prime minister, Shinzo Abe. The economic recovery he has so painstakingly engineered depends on a weak yen, which may rise again in value if alarmed investors begin dumping American dollars.
The shutdown forced President Obama to cancel participation this week in the Asia-Pacific Economic Cooperation forum in Bali, Indonesia, ceding the lead role at the crucial regional meeting to China’s president, Xi Jinping. The shutdown forced President Obama to cancel participation this week in the Asia-Pacific Economic Cooperation forum in Indonesia, ceding the lead role at the crucial regional meeting to China’s president, Xi Jinping.
Mr. Obama’s absence was viewed with anxiety in Japan, which is locked in a heated dispute with China over the control of a tiny group of islands and has counted on a firm American presence to keep China’s territorial ambitions in check. The shutdown renewed questioning in some Japanese media about the ability of the United States to maintain its dominant military presence in the region when it faces severe budget contraints at home. Mr. Obama’s absence was viewed with anxiety in Japan, which is locked in a heated dispute with China over the control of a tiny group of islands and has counted on a firm American presence to keep China’s territorial ambitions in check. The shutdown renewed questioning in some Japanese news media about the ability of the United States to maintain its dominant military presence in the region when it faces severe budget constraints at home.
President Obama addressed the concerns over his absence in a news conference on the standoff on Tuesday at the White House. “Already this week I had to miss critical meetings in Asia to promote American jobs and businesses,” he said. “And although as long as we get this fixed that’s not long-term damage, whenever we do these things, it hurts our credibility around the world. It makes it look like we don’t have our act together. And that’s not something we should welcome.” Mr. Obama addressed the concerns over his absence in a news conference on the standoff on Tuesday at the White House. “Already this week I had to miss critical meetings in Asia to promote American jobs and businesses,” he said. “And although as long as we get this fixed that’s not long-term damage, whenever we do these things, it hurts our credibility around the world. It makes it look like we don’t have our act together. And that’s not something we should welcome.”
Answering questions after his statement, Mr. Obama noted: "If we are — are creating an atmosphere in which people are not sure whether or not we pay our bills on time, then that will have a severe long-term impact on our economy and on America's standard of living." And he declined to list payment priorities, saying, “if the markets are seeing that we’re not paying all our bills on time, that will affect our creditworthiness even if some people are being paid on time.” Answering questions after his statement, Mr. Obama noted, “If we are — are creating an atmosphere in which people are not sure whether or not we pay our bills on time, then that will have a severe long-term impact on our economy and on America’s standard of living.” And he declined to list payment priorities, saying, “If the markets are seeing that we’re not paying all our bills on time, that will affect our creditworthiness even if some people are being paid on time.”
But he said that his absence at the APEC meeting would not do lasting damage, and that regional trade talks he is keen on pressing would continue. But he said that his absence at the Asia-Pacific Economic Cooperation meeting would not do lasting damage, and that regional trade talks he is keen on pressing would continue.
Last week, both Mr. Aso and the top government spokesman, Chief Cabinet Secretary Yoshihide Suga, tried to allay concerns about the standoff, calling it a domestic issue for the United States. But Mr. Aso’s comments on Tuesday were some of the bluntest yet by a top Japanese official, appearing to reflect growing impatience in Tokyo. Last week, both Mr. Aso and Yoshihide Suga, the top government spokesman and chief cabinet secretary, tried to allay concerns about the standoff, calling it a domestic issue for the United States. But Mr. Aso’s comments on Tuesday were some of the bluntest yet by a top Japanese official, appearing to reflect growing impatience in Tokyo.
The budget standoff “is likely to hurt all facets of the global economy through financial markets,” Mr. Aso said. “We have to consider the risk that prices of Japan’s holdings of U.S. Treasuries will decrease.”The budget standoff “is likely to hurt all facets of the global economy through financial markets,” Mr. Aso said. “We have to consider the risk that prices of Japan’s holdings of U.S. Treasuries will decrease.”
To express Japan’s concern directly to the Americans, Mr. Aso indicated that he may press the issue with the American treasury secretary, Jack Lew, when the two meet later this week during a two-day gathering of G-20 finance ministers in Washington. To express Japan’s concern directly to the Americans, Mr. Aso indicated that he may press the issue with the American Treasury secretary, Jacob J. Lew, when the two meet later this week during a two-day gathering of the Group of 20 finance ministers in Washington.
Those concerns seemed to gain additional impetus on Tuesday, when Japan’s army announced that a joint exercise with the United States Army that had been scheduled for next week in Japan had been canceled due to the American government shutdown. Those concerns seemed to gain additional impetus on Tuesday, when Japan’s army announced that a joint exercise with the United States Army that had been scheduled for next week in Japan had been canceled because of the American government shutdown.

Edward Wong contributed reporting from Beijing.

Edward Wong contributed reporting from Beijing.