Japan is ready to lend up to US$100 billion to the IMF to support nations reeling from the global financial crisis, Japanese Prime Minister Taro Aso said yesterday.
Aso’s pledge was among proposals outlined in a statement released ahead of a two-day G20 meeting today in Washington, during which Japan hopes to raise its clout as a global leader.
Aso blamed much of the crisis on individual governments’ failure to monitor and regulate the emergence of new financial products.
PHOTO: AP
“We should not forget, however, that at the root of this problem lies the issue of global imbalances ... that the deficit of the US, the key-currency country, is being financed by capital inflows from around the world,” Aso said.
He called for improvements in the IMF’s role in monitoring financial markets and detecting potential crises early, and urged member countries to boost the fund’s financial resources for emerging countries.
“Japan is prepared to lend a maximum of US$100 billion to the IMF from its Foreign Exchange Fund Special Account as an interim measure before a capital increase takes place,” Aso said.
The IMF has dipped into its reserves fund to provide emergency loans to Iceland, Hungary and Ukraine worth more than US$30 billion.
Aso also proposed a general capital increase for the Asian Development Bank, “which currently has limited scope for new lending.”
The G20 summit in Washington will bring together leaders from 20 of the world’s biggest developed and developing economies to discuss ways to tackle the global financial crisis, including possible coordinated tax cuts or spending increases around the world.
The Paris-based Organization for Economic Cooperation and Development forecast that economic output would shrink 1.4 percent this quarter for the 30 market democracies that make up its membership — and keep contracting until the middle of next year.
That would mean the developed world has now entered a slump estimated to last at least three quarters.
The Washington summit was scheduled to begin last night with dinner followed by closed-door deliberations today.
US President George W. Bush warned his counterparts on Thursday not to crush the global economy under a raft of strict new financial regulations.
“We must recognize that government intervention is not a cure-all,” he said. “Our aim should not be more government. It should be smarter government.”
Bush put forward his own prescription, which includes bolstering accounting rules, reviewing anti-fraud provisions for trading in stocks and other securities, and improving regulatory coordination.
The Europeans want to close loopholes that allowed some financial institutions to evade regulation and ensure supervision for all major financial players.
Meanwhile, Europeans were ready to lower their representation at international financial institutions to make more room for China and other emerging economies, European Commission President Jose Manuel Barroso said.
In an interview with the International Herald Tribune ahead of the G20 summit, Barroso said European leaders accepted that they were overrepresented at institutions like the IMF.
“From the contacts I had and the general spirit of the discussion from leaders and heads of states, there is an openness to accommodate an increased role of the emerging economies,” he said.
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