WASHINGTON — Japan is calling on the International Monetary Fund to adopt a set of structural reforms to reinforce its ability to prevent future economic crises and boost its legitimacy as a key financial lender.
In a statement presented to the IMF’s policy-steering International Monetary and Financial Committee, Finance Minister Naoto Kan said Saturday the IMF should set a clear target of ensuring financial stability as its postcrisis mission.
The statement also said that strengthening the IMF’s surveillance functions is “a pressing issue” and a pivotal tool in crisis prevention.
The IMF should be given the mandate to achieve these goals while the obligations of member economies are reviewed so “the IMF can appropriately implement multilateral surveillance, focusing on the spillover effects of each country’s macroeconomic policies and the situation of financial systems on other countries,” the statement said.
On the IMF’s lending role, Kan said that although some emerging economies in Asia faced difficulties dealing with the global financial crisis, they did not apply for IMF support.
This indicates that, in Asian economies, “there is a stigma” attached to the Washington-based lender concerning the fear of “the political cost of accessing IMF lending programs,” he said.
Kan asked the IMF to take a new approach to eliminating the stigma and urged the lender to explore ways to collaborate with regional financial mechanisms, such as the Chiang Mai Initiative, a network of bilateral currency swap schemes in East Asia.
On the lender’s quota system for allotting voting power, the statement repeated Japan’s position that power should be shifted from over-represented to under-represented countries to “appropriately reflect the current global economic reality.”
Last September in Pittsburgh, leaders of the Group of 20 advanced and emerging economies agreed to redistribute at least 5 percent of voting power in the IMF and 3 percent in the World Bank to developing countries to better reflect their growing economic influence.
Japan also sees the need to bolster the IMF’s capital so the institution can continue to play an effective role in supporting member countries, both in crisis prevention and crisis response, the statement said.
With regard to domestic policy, Kan pledged to keep economic stimulus in place to ensure recovery.
Kan also said the administration will formulate specific medium- and long-term measures to “help the Japanese economy dig itself out” of 20 years of stagnation and put it on track for sustainable and steady growth.
The government also plans to work out a medium- to long-term path for fiscal consolidation by crafting a “medium-term fiscal framework” that will set the outline for spending for the next three years as well as a “fiscal management strategy” that will define goals both in terms of fiscal deficit and debt outstanding, to secure market confidence in fiscal sustainability, the statement said.