Obuchi and Clinton meet Tuesday in New York
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CNN's Eileen O'Connor reports on President Clinton's talk with Obuchi
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In this story:

• Clinton urges 'swift and effective' action
• U.S. advises infusing public money into banks
• Japan can learn from other countries
• U.S. sending new deregulation proposals

NEW YORK (CNN) -- Japanese Prime Minister Keizo Obuchi said on Tuesday he expects Japan's parliament to deal quickly with the problems plaguing the country's financial system.

"I feel the parliament and we will move with good speed to deal with measures for the stability of Japan's finance system," Obuchi said, following a three-hour meeting with U.S. President Bill Clinton.

"We shall enact relevant laws as soon as possible and also take concrete steps as soon as possible," Obuchi said.

Obuchi faces severe political problems, with record low public approval ratings in Japan and an opposition-led upper house with virtual veto over any reform plan.

Clinton urges 'swift and effective' action

Clinton and Obuchi had what were described as candid talks on how Japan can rebound from its worst recession in 50 years.

"I think there is virtually unanimous support in the world for the kind of financial reforms that would restore economic growth in Japan," Clinton said during a picture-taking session with Obuchi.

Deputy Treasury Secretary Larry Summers told reporters after the meeting that Clinton stressed the urgency of "swift and effective" action to stimulate domestic demand in Japan.

U.S. advises infusing public money into banks

Summers said Clinton emphasized the need for Japanese financial authorities to infuse public money into Japanese banks to ensure continued lending on a "strong and sustainable basis."

A Japanese plan for fixing the ailing banking system has been coming apart since it was agreed upon Friday between opposition and ruling party leaders.

The plan failed to work out how the government would deal with bank debts of nearly a trillion dollars, in the face of opposition to using public money.

A Japanese government source said Obuchi pledged to Clinton to speed up the disposal of bad loans by Japanese banks and to work toward increased disclosure in Japan's financial system.

Japan can learn from other countries

Obuchi said Japan could learn lessons from other countries, particularly the plan used by the United States to clean up its savings and loan crisis in the 1980s.

He described his discussions with Clinton as a "useful exchange of views" and said they dealt more with the general nature of the financial problems than any specific cases.

Asked about the possibility of any other financial institutions failing in the near future, Obuchi said the government's basic philosophy was to be "too big, too fast." He did not elaborate.

He mentioned that discussions with Clinton touched on the August 31 launch of a missile by North Korea and said this was "a matter of great shock for Japan."

U.S. Deputy National Security Adviser Jim Steinberg said the two leaders reaffirmed the U.S.-Japanese security relationship.

U.S. sending new deregulation proposals

U.S. Trade Representative Charlene Barshefsky said the United States will give Japan a new set of proposals by the end of this month to deregulate its economy in the sectors of telecommunications, pharmaceuticals and construction.

Japan has long resisted opening its markets to outside competition.

More proposals will be sent next month on deregulating Japan's auto and auto parts markets, Barshefsky said.

Clinton would like a full set of deregulatory measures reached by the summit of the Group of Seven industrialized nations next year, she said.

The U.S. trade deficit with Japan was $56 billion last year.

Clinton aides said the two leaders got along well and agreed to refer to each other as "Keizo" and "Bill."

Obuchi accepted an invitation by Clinton for a state visit to Washington early next year.

It will make up for a visit canceled last July when Obuchi's predecessor, Ryutaro Hashimoto, resigned upon the collapse of his government. Obuchi is the sixth Japanese prime minister with whom Clinton has dealt in nearly six years as president.

Reuters contributed to this report.