Japan Brief / FPCJ, No. 0868
　　　　
November 20, 2008


Japan Proposes to Bolster IMF’s Lending Capacity at G- 20 Summit

At the financial summit of the group of 20 major countries (G-20) held in Washington on November 15, Prime Minister Taro Aso of Japan proposed to bolster the lending capacity of the International Monetary Fund (IMF) to help meet the growing need of emergency funds in countries hit by the global financial crisis. He announced Japan’s readiness to offer $100 billion out of its nearly $1 trillion foreign exchange reserve for this purpose, calling on other countries, such as China and India, to follow suit.

Prior to the G20 summit, Japan had been preparing to show leadership in strengthening the IMF’s function to cope with the deepening international financial crisis, which is starting to affect the actual economies of not only developed but developing countries as well. In a press conference following the meeting, the Japanese prime minister stated that his government was intent on working for closer regional cooperation with countries in Asia to push measures to contain the economic crisis and buttress the world economy. He stressed the importance of this, noting that the region is the growth center of the world. The government later announced that it would send Masakazu Toyoda, former vice minister of economy, trade and industry, and Yoshinori Katori, ambassador in charge of ASEAN, to Southeast Asian countries as Special Envoys of the Prime Minister to discuss the issue.

Aso, however, was not specific about the reorganization of the international financial system, centering on the IMF, which is the target of the emerging economies’ demand for an overhaul. The growing presence and stronger voices of the emerging economies led by Brazil, China and India proved to be the most prominent feature of the financial summit that represented a marked change in the landscape of the world economy.

On another key issue on the agenda of the financial summit—the enhancement of international surveillance and regulations for financial institutions to prevent a future financial crisis like the one that is currently wrecking havoc, Japan took a position somewhere in between European countries seeking tight regulations and the United States which is less enthusiastic about them.

The Japanese prime minister also declared that Japan stood by the United States in upholding the dollar as the world’s key currency, a stance in contrast with French President Nicolas Sarkozy’s argument that the era of the dollar as the sole key currency was over.

The G-20 summit was hailed as a historic event that signified the international resolve to counter a gathering financial and economic storm, but it was viewed as having stopped short of offering specific measures, which more or less were put off until the next summit to be held in spring next year. What the world is most expecting immediately seems to be the fiscal measures to be taken by each country to boost demand and prevent a further economic downturn. The Japanese government on its part is poised to implement a 27 trillion yen stimulus package.

Historic Significance Noted
Japanese newspapers in their editorials on November 17 noted the “historic significance” of the G-20 financial summit in that such a meeting took place at all with reasonable success in a show of cooperative spirit. But the newspapers invariably called for more specific actions to remedy the economic ills and shore up the economies (editorials are in alphabetical order).

[Framework is only response to global upheaval] (Asahi Shimbun)
“Now that the G-20 meeting has wrapped up, the leading industrial countries that have been battered by the financial hurricane have no choice but to ask fast-growing emerging countries to support their efforts to lead the world out of the slump,”“The United States has been propping up global demand by absorbing imports from all over the world. Much hope is being pinned on Asia's vigorous economic growth, especially China's, as a potential cushion for the drop in U.S. consumption. Japan can contribute to the well-being of the world by putting Asia back on a growth track.”

[Historic cooperation must be put into a palpable form] (Mainichi Shimbun)
“A first step was taken toward solution from the common recognition that unless the world works together with shared wisdom and coordinated actions, everybody will end up being a loser. While all depends on specific policies and actions to be taken in the future, we give credit to the summit which confirmed a direction in which to move, if not entirely clear, without succumbing to denunciation and confrontation. What was particularly significant was that the leaders in the meeting stressed the importance of a free trade system and pledged not to take protectionist policies.”

[Next financial summit must present answers rather than general ideas] (The Nikkei)
“We welcome the attitude shown by major members of the world economy to suppress underlying differences and unite in grappling with the crisis,” “Japan, which has laid out a plan to assist developing countries in cooperation with the IMF and the World Bank, is required to propose more active steps in a broader field,” “As the world’s second largest economy, there are many things for Japan to do, including reinvigorating its weak domestic demand.”

[Remaining task is implementation and finishing up reform] (Sankei Shimbun)
“The holding of the first G-20 summit reflects the rise of emerging economies as a trend of the times. The seven advanced countries (G-7) used to account for 70% of the world’s gross domestic product, but their share has diminished to less than 60%, while the total for the G-20 accounts for 90% of the world’s GDP. A consensus of foremost significance that emerged from the summit was the common recognition, to a certain degree, of causes of the financial crisis (pursuit of high returns in disregard of risks, oblique financial commodities, an inadequate oversight system, and the like).”

[G-20 leaders resolve to overcome crisis] (Yomiuri Shimbun)
“In a speech ahead of the G-20 summit meeting, U.S. President-elect Barack Obama asked the U.S. government to immediately implement additional economic stimulus measures. In contrast to the administration of President George W. Bush, Obama has been taking a protectionist stance. However, promoting free trade is vital to activate the world economy and to accelerate its growth. It is highly likely that Obama may be pressed to modify his vision sooner or later. The policies Obama sets in motion after taking office and launching his administration on Jan. 20 will be the main focus of the next financial summit meeting.”

(Copyright 2008 Foreign Press Center / Japan)