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US must grasp global impact of debt crisis: Japan

A Royal Mail post box stands on a street in London on July 10, 2013/AFP

A Royal Mail post box stands on a street in London on July 10, 2013/AFP

JAP FINTOKYO, October 15 – Japan’s finance minister said Tuesday US lawmakers needed to get to grips with the seriousness of the budget impasse in Washington and its reverberations around the world.

Taro Aso, who also serves as deputy prime minister, said the Republican Party’s ultra-conservative Tea Party faction appeared to be unaware of the wider implications.

“Many of them don’t seem to understand well the magnitude of the international impact this problem could have,” Aso said at a news conference, according to Dow Jones Newswires.

“In the worst scenario, there will be a default, which is serious” for Japan, one of the biggest holders of US government bonds, Aso was quoted as saying by the Nikkei daily.

“The impact is big at a time when the (Japanese) economy is about to grow,” he added.

But Aso also sounded an optimistic note, saying he expects the issue will be resolved.

“I guess there will be some compromise in time,” he told reporters.

With just days to go before Washington runs out of cash to pay its bills, Republicans and Democrats said they were close to an agreement to end a stand off that has shut the government for two weeks.

Japan holds some $1.1 trillion in Treasuries, making it the biggest lender to the US government after China.

Aso made similar remarks on Friday in Washington after he attended a meeting of finance chiefs of the Group of 20 major economies there.

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“Japan expects this issue to be resolved once and for all without delay,” Aso said. “This is not only a matter for the United States.”

Aso suggested that the United States needed a solution more permanent than a proposed deal to extend the debt ceiling for six weeks to avert default next week.

Without a deal, there would be “graver consequences than just the closures of national parks, so we are looking at this with a very close eye”, Aso said.

The US government has been partially shut down as Republicans refuse to approve funding unless President Barack Obama guts his signature reform of expanding health care coverage.

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