Japan's finance minister expressed concern Wednesday about the effectiveness of U.S. sanctions on Iran and their potential impact on Japanese banks.
Jun Azumi's comments came as a delegation U.S. government officials began talks with Japanese counterparts about the sanctions targeting Iran's oil industry in a bid to thwart what Western governments say is an effort to develop nuclear weapons.
Japan has given mixed signals on the sanctions. Azumi declared last week that Japan would move quickly to reduce its oil imports from Iran after meeting with Treasury Secretary Timothy Geithner, but other officials including the prime minister have said economic implications need to be considered.
Azumi also struck a more cautious tone Wednesday, telling journalists at the Foreign Correspondents' Club of Japan that if the sanctions were imposed immediately, they could sustain "tremendous" damage to Japanese banks. The sanctions would bar financial institutions from the American market if they do business with Iran's central bank.
"We want to take steps to keep the damage to the Japanese economy to a minimum," Azumi said.
Japan imports about 9 percent of its oil from Iran and has been steadily reducing that percentage in recent years. Analysts say Japan will likely turn to other major oil suppliers to offset any further declines from Iran.
Azumi said he understood the potential danger of Iran's nuclear program, but also acknowledged "there were some concerns" that the sanctions would not be effective in convincing Iranian authorities.
He added that "Russia and China hold the keys to resolving this situation."
China, the world's biggest energy consumer, remains unwilling to back an oil embargo against Iran. South Korea also has remained non-committal.
Visiting U.S. officials met with Japanese counterparts for about 90 minutes Wednesday to discuss how the sanctions might be implemented.
"It was clear that we share an interest in preventing Iran from acquiring nuclear weapons," said Robert Einhorn, the State Department's special advisor on nonproliferation and arms control.
Einhorn said the two sides also shared the importance of a "dual-track" strategy in dealing with Iran involving both pressure and engagement.
Earlier in the day, Azumi met with U.K. Chancellor of Exchequer George Osborne to discuss trade, Iran and other matters. Osbourne told reporers that the British government appreciated that it is not easy for Japan to switch nearly one tenth of its oil supplies quickly.
But he said the two countries agreed it is not acceptable for Iran to continue to develop a nuclear weapon and that "we are prepared to use the tools available to us in the international community to stop that happening."
Tehran says its nuclear program is for civilian energy use and scientific research.