Japan's finance minister will seek to strengthen economic ties with his
country's biggest trading partner in a visit to Beijing this weekend at a time
when political relations are at their lowest ebb in decades.
Japan-China relations have been strained over a range of issues, particularly
Japanese Prime Minister Junichiro Koizumi's visits to a Tokyo war shrine that
China sees as a symbol of Japan's past militarism.
In what will be a test of his financial expertise and diplomatic savvy,
Finance Minister Sadakazu Tanigaki -- a dark-horse candidate to become Japan's
next prime minister -- is set to meet his Chinese counterpart, Jin Renqing, on
Saturday afternoon, heading a delegation of 30 ministry officials.
Tanigaki and Jin agreed last June to set up a new framework for regular
meetings between finance ministry officials of the two Asian economic giants.
This weekend's meeting is the first under this new framework.
Tanigaki said on Friday that topics would range from bilateral fiscal and
financial issues to the global economy, and the sensitive topic of the Chinese
yuan currency could be on the table.
"We may discuss the issue of the yuan as well as our country's efforts
towards structural reform as part of the overall talks," Tanigaki told a news
conference.
PRESSURE ON CHINA
China is under international pressure, particularly from the United States,
to make its currency more flexible despite Beijing's removal of the yuan's
decade-long peg to the dollar last July. The currency has appreciated 1 percent
since then.
U.S. politicians claim that the yuan is so undervalued that it gives Chinese
products an unfair advantage in U.S. markets. Two U.S. senators were in Beijing
this week to decide whether to proceed with a vote on a bill that threatens to
impose a 27.5 percent tariff on Chinese exports to the United States if China
does not revalue the yuan further.
Japan, in contrast, is expected to take a softer approach out of concern that
too much pressure could be counterproductive.
"We've been saying that currency policy is an important economic tool and
that it would be better to have more flexibility," Hiroshi Watanabe, vice
finance minister for international affairs, told reporters on Thursday.
Watanabe, Japan's currency policy tsar, added that China may be taking "a bit
too long" to adapt to its new currency regime.
Tanigaki will also want to fend off worries at home that the lengthy
political chill between the two countries may harm prospering economic ties.
China replaced the United States as Japan's top trade partner in 2004, and
trade between the two rose 13 percent last year to a record $189 billion.
Japan said on Thursday it would postpone a decision on fresh yen loans to
Beijing until after its fiscal year ends on March 31. While Tokyo said this did
not mean Japan was cutting off or freezing aid to China, it could be a fresh
bone of contention.
POLITICAL PROFILE
A successful outcome to the Beijing trip could boost Tanigaki's political
profile ahead of a leadership race at home, where he is considered a contender
for the prime minister's job when Koizumi steps down in September.
But Tanigaki, a 61-year-old former lawyer with a low-key image who has lagged
other hopefuls in popularity polls so far, is not scheduled to meet any Chinese
political leaders on the trip and may not have a chance to showcase his
diplomatic skills.
Mending fences with China on the political front in any case is not seen
easy, as shown by Trade Minister Toshihiro Nikai's visit to Beijing in late
February.
Nikai was the highest-level Japanese official to meet Chinese leaders in
months, but talks were marred by Chinese Premier Wen Jiabao's criticism of
Koizumi's annual visits to the Yasukuni shrine, where convicted war criminals
are honoured alongside Japan's war dead.
Japan invaded and occupied large parts of China from 1931 to 1945, and
memories of Japanese atrocities run deep.
Tanigaki has taken a cautious stance on the Yasukuni issue.
"There is no change in my view that we need strategic ambiguity," Tanigaki
said last week when asked whether a Japanese prime minister should visit the
shrine.
Relations have also worsened due to competition over energy resources in
disputed areas of the East China Sea, rivalry over regional dominance and mutual
suspicion over military ambitions.