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 Japan Brief |
| 【Japan Brief】At G-20 Meeting Japan Sides with the U.S. and China in Advocating Stimulus |
Japan Brief/FPCJ, No. 0917
April 6, 2009
At G-20 Meeting Japan Sides with the U.S. and China in Advocating Stimulus
At the second G-20 financial summit, Japan, together with China, took a distinctly positive stance to side with the Anglo-American call for globally coordinated stimulus policies to pull the world out of the recession. Prime Minister Taro Aso, who was at the meeting held in London on April 2, also played a major role in proposing to bolster the lending capacity of the International Monetary Fund to help developing and emerging countries suffering from the global credit crunch.
The conference was characterized by U.S. advocacy of strong fiscal stimulus, which European countries, France and Germany in particular, rejected in favor of stronger restrictions on financial business that America and Britain chafed at.
Before the meeting President Barack Obama of the United States called for a global agreement on stimulus spending worth 2% of GDP, but he backed down as his proposal met strong opposition from European Union countries, which were wary of lavish spending programs for fear of subsequent inflation and fiscal deterioration. The G-20 declaration ended up with a call for $5 trillion in stimulus spending for the world as a whole through 2010, instead of committing each country to a specific size of spending. While this represented a sum total of what countries have committed so far, the United States accounts for $2 trillion of it and Japan $0.6 trillion.
Japan’s fiscal 2009 budget that started on April 1 includes, among other things, 1 trillion yen in personal tax cuts and another 1 trillion yen appropriation for unspecified emergency use as needed by economic conditions in the future. The country’s GDP shrank by 12.1% at an annualized rate in the October-December period of last year, which is likely to be followed by a similarly deep decline in the first three months of this year. With every economic indicator pointing steeply downward, the Bank of Japan’s short-term business survey (tankan) for March showed the worst deterioration on record of business sentiment at major manufacturing companies, down 58. Job losses are rising at a worrying pace.
No sooner had the FY 2009 budget bill been passed on March 27, than the worsening economic situation prompted the government to consider an extra budget for additional measures to prevent further job losses and stimulate demand. The extra budget is expected to be on the order of 10 trillion yen. Since last summer, the government has announced three stimulus packages amounting to 12 trillion yen.
Aside from stimulus spending to meet urgent short-term needs, the government has also started studying mid- and long-term measures aimed at strengthening the nation’s growth potential over a period of three years. The economic growth strategy will center on solar power generation and other low-carbon measures, health care, and revitalization of agriculture, among other things. The growth strategy program is aimed at creating 2 million new jobs.
At the G-20 summit, Japan took an initiative to bolster the IMF facility, offering $100 billion on its own for the purpose. A total of $1,100 billion is to be committed through the IMF and other international organizations to help emerging and developing economies under financial distress.
With regard to changes to be made to the IMF, China and other emerging economies are making their voice heard to seek a larger share of the institution’s capital and hence its operation. China is also calling for an increased use of special drawing rights (SDR) in place of the U.S. dollar, a move seen as a long-term challenge to the greenback as the world’s key currency. In contrast, Japan, the second largest holder of U.S. treasury debt after China, made its intention clear to defend the U.S. dollar as the key currency, in line with its overall policy to stand by the U.S. in the fiscal and monetary policy initiatives.
Historic Significance Recognized
Japanese media commentaries generally recognized the significance of the G-20 agreement which showed a united resolve to work toward recovery of the world economy, although they said it only marked an important first step and its success would depend on how each country delivers on the agreement and works on issues left unsettled. Editorials also called for greater efforts on Japan’s part to not only recover from its own downturn but to lead the world out of the economic plight.
Asahi Shimbun (April 4)
“The G-20 declaration contains many holes and uncertainties. But what is needed now is not further international debate on how to resuscitate the groggy world economy. Each country must now go all-out to put the agreements into action.”
Mainichi Shimbun (April 4)
“What is worrying is Japan’s waning presence. The financial summit may well mark a turning point for a world forum of discussion on issues of a global scale to a shift from G-8 to G-20. Japan’s capability to make proposals, negotiate and coordinate will increasingly be tested as global and national interests become more and more complex.”
The Nikkei (April 3)
“It is an achievement of historic significance that the G-20, which accounts for 90% of the world economy, has reached common agreement that sets its eyes beyond the current crisis.” “It is hoped that Japan will facilitate its pace of domestic demand recovery and proactively propose ideas to overcome the global crisis, not be left behind in the changing dynamics of the world.”
Sankei Shimbun (April 4)
(Despite differences that emerged among participants) “It is noteworthy that the G-20 leaders shared the perception that each country was a member of the global economy, and issued a message directed at moving out of the financial crisis and depression. While it will take time for bad assets to be settled and stimulus measures to produce results, countries ought to cooperate to do their best to attain the goal.”
Yomiuri Shimbun (April 3)
“The G-20 summit arose as a way of overcoming the limitations of the Group of Seven and Group of Eight major nations frameworks in tackling global issues. But it now seems apparent that the G-20 also faces a number of problems due to the large number of participating members and unresolved differences between them.”
(Copyright 2009 Foreign Press Center / Japan)
*Japan Brief is an original production of the Foreign Press Center, Japan, and does not represent the views of the Government of Japan or of any other body.
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