Japan, China may bolster IMF funds to stem eurozone crisis

Kyodo

Tokyo and Beijing are considering ways to boost the IMF’s resources to prevent Europe’s sovereign debt crisis from dragging down the global economy, Finance Minister Jun Azumi said Saturday after talks with his Chinese counterpart in Tokyo.

While denying that Asia’s two biggest economies had reached an agreement on whether to extend additional money to the International Monetary Fund, Azumi said they will continue to discuss the matter through “various channels.”

He also repeated that Tokyo will determine its position by the time the finance chiefs of the Group of 20 leading economies gather later this month in Washington.

Azumi said he and Chinese Finance Minister Xie Xuren agreed that “the crisis is not yet over but (the global economy) is moving in a good direction,” and stressed that “the Asian economy must lead a global economic recovery.”

The ministers’ talks in Tokyo kicked off the latest round of biannual financial policy meetings between the two countries.

Working-level officials on both sides are hammering out the details of an earlier agreement that allows Japan to start buying Chinese government bonds. Both sides will also promote the use of their own currencies instead of the dollar in bilateral trade.

In December, Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao agreed to step up bilateral cooperation in international finance, including encouraging companies to settle transactions in yen or yuan to diminish foreign exchange risks.

In March, China allowed Japan to purchase up to 65 billion yuan (about ¥840 trillion) in Chinese government bonds. Beijing usually only permits designated countries to invest in limited amounts of its sovereign debt.

As for their IMF plans, Tokyo and Beijing said in February they were prepared to support efforts by the Washington-based global lender to address the eurozone’s debt crisis, with Azumi visiting Beijing for talks with Xie and Chinese Vice Premier Wang Qishan.

The issue will be high on the agenda at the G-20 meeting of finance ministers and central bankers from April 19 to 20, which will take place on the sidelines of the spring meetings of the IMF and World Bank. Both Japan and China are members of the G-20.

Azumi has said that Japan, the second-biggest stakeholder in the IMF after the United States, is ready to lead the debate at the G-20 given Washington’s reluctance to become actively involved in a fresh round of talks on boosting the IMF’s resources.