Japan should take supportive macroeconomic policies and carry out further structural and banking reforms, according to a semiannual report released Thursday by the U.S. Treasury Department.
Japan's economy slowed in the second half of 1999 after a brief rebound in the first half, the report says.
"As a result, the need for structural reforms and achieving sustained, domestic demand-led growth is even greater in Japan than in Europe," it says.
The report reviews developments in U.S. international economic and exchange rate policies during the five-month period from July 1 through Dec. 31.
The report is required to be submitted to Congress under the Omnibus Trade and Competitiveness Act of 1988.
Deregulation efforts in Japan have made little progress except in the telecommunications, banking and retail sectors, the report says, adding that the benefits of deregulation in these three sectors are now clearly evident.
The percentage share of households owning a cellular phone, for example, has soared from a mere 3 percent in 1993 to 60 percent in 1999 due to deregulation, it says.
New investment in mobile communications, at $1.5 trillion, is equal to planned new investment in the domestic auto industry, the report says.
On the banking sector, the report says important progress has been achieved but more efforts are necessary in disposing of nonperforming loans.
"Extending the success of deregulation efforts in these three areas will also require a sustained, supportive macroeconomic environment," it says.