TOKYO – Treasury Secretary Henry Paulson, on the first Japan trip since he took office, told reporters the U.S. financial sector is healthy and bad mortgage debt from the housing slump will be limited. “Credit issues are there, but they are contained,” he said, according to Bloomberg News, and most lenders won’t feel “a big impact.”
A surge in defaults has forced more than 20 lenders to close or seek buyers since the start of 2006, Bloomberg said. But policymakers repeatedly have noted that the losses are concentrated in the subprime loans designed for lower-income, higher-risk borrowers.
Paulson met yesterday with Prime Minister Shinzo Abe before joining his Japanese counterpart, Koji Omi, for a private dinner. “Currencies should be determined by the market,” Paulson told reporters after the dinner, where he said they discussed the yen and the slide in stock markets. He played down the recent global stock selloff, saying the fundamentals remain strong and the “markets seldom move forever in a straight line.”
He heads to South Korea today and Beijing tomorrow, before giving a speech Thursday in Shanghai that he plans to use to press China to speed its move to unfettered capital markets, Bloomberg said. “If China moves ahead, there will be less risk in the world economy and benefits for Japan and the whole world,” Paulson said today.
