Japan gives muted welcome to US debt fix

Japan gives muted welcome to US debt fix

TOKYO - Japan's finance minister on Friday gave a muted welcome to the US debt deal, but hinted at the need for a more permanent solution to the warring in Washington.

In the first comments on the deal by a senior member of the Japanese government, Taro Aso said the last-gasp agreement in the United States was "a welcome move".

But he added that there was work to be done to remove the threat to the global economy that was posed by a possible debt default.

"I expect the talks in US congress will move in a positive direction and find a settlement," he told journalists at a regular press conference.

Japan is the second-biggest foreign holder of American debt, behind China.

Any default on US obligations would have cut the value of its more than $1.1 trillion holdings, a problem that would be compounded by the likely rise in the value of the yen as investors fled to the safe-haven unit.

Aso's comments came after US President Barack Obama warned the dysfunction on Capitol Hill had done the country no favours.

"Probably nothing has done more damage to America's credibility in the world, our standing with other countries, than the spectacle that we've seen these past several weeks," he said.

"It's encouraged our enemies, it's emboldened our competitors and depressed our friends who look to us for steady leadership."

The compromise plan thrashed out in the Senate and passed by the House only funds government until January 15 and extends US borrowing authority until February 7.

It remains unclear if Republicans, politically wounded by their tactics, will seek to use the levers of shutdown and default again.

The day before the agreement, 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 of their actions.

"Many of them don't seem to understand well the magnitude of the international impact this problem could have," he told a news conference.

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