WASHINGTON U.S. President Barack Obama and Japanese Prime Minister Taro Aso agreed on Tuesday to work together to stem the global economic crisis and discussed the need to maintain confidence in the U.S. dollar.
"The most important thing is to maintain confidence in the dollar as a key currency. If confidence in the dollar is damaged it will have a huge affect," Aso told reporters.
The dollar has risen in the last six months as investors flee emerging markets and stocks. It jumped on Tuesday to a three-month high against the yen.
But Tokyo is worried about the yen's persistent strength in global currency markets. As demand for exports has plummeted, Japan suffered its worst economic contraction since the 1970s in the final quarter of 2008.
Any weakening of the dollar versus the yen would further dampen demand for Japanese exports.
A White House statement did not mention the dollar but said the leaders would work together to respond to the global economic downturn and to unfreeze credit markets.
While the recession that has hit the world's two largest economies was a main topic, the two also discussed North Korea, Afghanistan and global climate change.
But the main purpose of the meeting was to shore up a close friendship between the two countries that nonetheless has given way to some doubts on the Japanese side about whether the United States was taking Tokyo for granted.
In office for only a month, Obama bestowed on Aso the prestige of being the first foreign leader to meet him at the White House, giving Aso a potential boost when he is extremely unpopular at home with an approval rating of less than 20 percent.
After a series of flip-flops and gaffes by his government, some in Aso's own Liberal Democratic Party have called for him to be replaced. A poll released this week showed almost four out of five Japanese voters want him to quit within months.
Analysts said the meeting was less about the relationship between the two men than the alliance between their countries.
"Obviously, the friendship between the United States and Japan is extraordinarily important to our country," Obama told reporters during a picture-taking session with Aso.
"The alliance that we have is the cornerstone of security in East Asia. It's one that my administration wants to strengthen," he added.
Speaking in English, Aso said he was "very honored" by the invitation to visit and said the countries would "work together hand in hand" on issues like the economic crisis.
ENGAGING NORTH KOREA
Obama's meeting with Aso took place hours before Obama was to give a major nationally televised speech in which he will discuss the newly passed $787 billion economic stimulus plan and other efforts to rescue the U.S. economy from free-fall.
A White House statement talked about the effort to persuade North Korea to eliminate its nuclear weapons program and "deal with the problem of North Korea's missiles."
On Tuesday, North Korea said it was preparing to launch a satellite on one of its rockets, which analysts have said would actually be the test-firing of a long-range missile designed to strike U.S. territory.
Despite its staunch friendship with the United States, there has been some anxiety in Tokyo over moves in the final years of the Bush administration to engage North Korea.
Obama's campaign promise of broad engagement with foes like North Korea unsettled Tokyo. Separate concerns center on fears that the Obama administration may be inclined to pursue more protectionist trade policies.
But U.S. officials have made a big push to put those concerns to rest. Secretary of State Hillary Clinton, who made Japan the first stop on a week-long Asian tour last week, took a tough line on North Korea and also emphasized the importance of the bilateral alliance with Japan.
Japanese media have speculated that the need to find buyers for a raft of new U.S. Treasury bonds to fund the massive U.S. economic stimulus package might be one reason behind Obama's charm offensive. Japan is the second-largest holder of U.S. government bonds after China.
But a Japanese official said he did not expect the issue to be on the agenda and that Tokyo sees "no particular problem" in the bond market at this time.
(Reporting by Caren Bohan, editing by Vicki Allen)