Japan Says It Will Reduce Iran Oil Imports

WSJ — Japan's finance minister told visiting U.S. Treasury Secretary Timothy Geithner that his country will take steps to reduce its dependency on oil imports from Iran, taking a much more conciliatory approach to the matter than China did a few days ago.

"We want to take actions to further reduce our 10% dependency as soon as possible in a planned manner," Japan Finance Minister Jun Azumi said.

Japanese crude imports from Iran came to about 10% of its total crude imports in 2010, but Mr. Azumi said that Japan has reduced its oil imports from there by 40% over the past five years.

On the second leg of his Asian trip, Mr. Geithner said that the U.S. appreciates Japan's cooperation in dealing with Iran as the U.S. explores ways to cut off Iran's central bank from the global financial system.

"We very much appreciate the support Japan has provided in standing with us and the international community," Mr. Geithner said at a joint press conference, regarding the U.S. objective to pressure Iran over its suspected nuclear weapons program. He said that the U.S. was working closely with Europe, Japan and other countries to pressure Iran.

Mr. Geithner, however, characterized those efforts as being in "the early stages, just the initial stages" of consultations.

Concerns over U.S. legislation that would punish global banks that deal with the Iranian central bank have grown among Iranian oil importers such as China, Japan and South Korea.

During his trip to China earlier this week, Mr. Geithner urged officials to greatly reduce imports of Iranian crude oil, and explained to them a new U.S. sanctions policy against countries that don't curtail their purchases.

But it is far from clear whether the Chinese will go along with the sanctions regime. Faced with U.S. initiatives, Chinese officials customarily take months before making their decision clear. In public, Chinese officials have forcefully opposed unilateral U.S. sanctions on Iran.

Mr. Azumi said Thursday that Japan would work closely with the U.S. on the issue.

The Geithner-Azumi talks come as Japanese Foreign Minister Koichiro Gemba wraps up a tour of the Middle East this week where he asked major oil-producing countries, including Saudi Arabia and the United Arab Emirates, to increase oil production. JX Nippon Oil & Energy Corp., Japan's largest refiner by capacity, said Tuesday that it has been in talks with Saudi Arabia and a few other oil producers about possible purchases in case of a ban on Iranian crude.

Messrs. Azumi and Geithner also discussed broader global financial issues, including the ongoing crisis in Europe and Japan's efforts to recover from last year's earthquake, tsunami and nuclear crisis.

"We agreed that Europe itself, as its first step, should strengthen its crisis firewalls to give a sense of stability to the market," Mr. Azumi said.

Mr. Geithner also emphasized the importance for Europe of making its financial backstop strong and credible to markets and praised the role played by the International Monetary Fund in the region's strategy.

"We are fully prepared to support a more substantial role by the IMF in the context of supporting, supplementing a stronger European response," he said. Mr. Geithner also said that Europe's leaders "appear to be making some progress in containing" their crisis.

The two also took a swipe at China, urging Beijing to let is currency appreciate further.

Mr. Azumi said Japan will continue to call on China to make its currency regime more flexible to better reflect its economic fundamentals and Mr. Geithner said the U.S. shared with Japan an interest among the Group of 20 industrialized and developing economies to see undervalued currencies rise.

Separately, Japan's government and central bank expressed concern that a U.S. rule on proprietary trading could adversely effect the Japanese government bond market and cause banks to wind down operations in each others' countries.

The joint letter from the Financial Services Agency and the Bank of Japan asks the U.S. to give "due consideration" to how it implements the "Volcker Rule" that would limit some proprietary trading by banks in the U.S. The letter was dated Dec. 28, 2011.

A Japanese finance ministry official said earlier that Mr. Azumi raised Japan's concerns in his meeting with Mr. Geithner.

Write to Tatsuo Ito at [email protected]