Japan, US discuss common economic challenges

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Japan and the United States, still the world's two biggest economies, face similar roadblocks as they deal with fiscal and economic challenges, Japanese Finance Minister Naoto Kan said on Friday.

In a briefing that stressed the common ground Kan found after his first meeting with US counterpart Timothy Geithner since he took over as finance minister in January, Kan said problems were similar for both countries.

"The United States faces roadblocks in terms of its economy and fiscal policy. Japan has similar issues. The two countries both face the same kind of difficult problems," Kan told reporters.

A US statement issued after the meeting said Kan and Geithner had discussed the "critical importance" of rebalancing economies and the "shared priority" of achieving comprehensive financial reform.

Asked if he and Geithner had discussed foreign exchange issues, a topic that has often divided the two economic powers, Kan only said: "We exchanged views on various topics, which include some sensitive issues."

Kan said he expected financial regulation to be among the major issues at the G7 meeting, although he declined to say what he discussed with Geithner on the issue.

Japan has barely pulled out of recession and deflation and weak domestic demand are keeping its economic recovery fragile. But a high deficit means it has little room to boost spending.

Tokyo is under pressure from ratings agencies to keep a tight rein on finances and markets already fear it could face a future funding crunch as public debt climbs to almost twice the size of the economy, by far the heaviest burden in the developed world.

Asked if he talked about vehicle recalls by Toyota Motor Corp with Geithner, Kan said the bilateral meeting focused more on expected topics at the G7.

Toyota has recalled more than 8 million vehicles worldwide for two separate problems with sticky accelerator pedals. One of the problems has led to five deaths in two incidents, according to US safety authorities.