WASHINGTON – The leading role Japan played in convincing the Group of 20 major economies to almost double the resources of the International Monetary Fund highlighted Tokyo’s fear of losing its global presence to emerging economies such as China.
When their two-day meeting ended Friday in Washington, Finance Minister Jun Azumi was praised by the other G-20 finance chiefs for quickly declaring Japan’s contribution to the war chest of the multilateral lender, which is being pressured to reinforce the battle against the sovereign debt crisis in Europe.
“After all, we don’t want to lose to China,” a Japanese government official said. “We have already lost our lead to China, from gross domestic product to foreign-exchange reserves. There is concern about how we can assert Japan’s presence” on the global stage.
Japan said last week that it will extend $60 billion in emergency loans to the IMF, making it the first and biggest non-European contributor. More than 10 other countries followed suit. China, meanwhile, declared its financing commitment but fell short of specifying an amount.
The showing was viewed as one of the rare times that a Japanese attempt to stay in the limelight actually paid off.
The G-20 “retained investor confidence” in its response to the eurozone crisis, said Takatoshi Kato, president of the Japan Center for International Finance. “Becoming the first to declare the contribution, Japan showed its presence,” the former vice finance minister for international affairs said.
However, some analysts were skeptical about how the move can actually further Japanese interests. “At the G-20, Japan should do more about currency policy, including exploring chances for weakening the yen or sounding out the extent to which the other members can tolerate a weaker yen,” said Hiromichi Shirakawa, chief economist at Credit Suisse in Japan.
Japan triggered criticism from European and U.S. lawmakers last year for conducting a series of unilateral yen-selling interventions to stem its currency’s rise against the dollar and euro, which was damaging the profitability of its exporters. The critics said attempts to artificially control foreign-exchange rates could complicate efforts to encourage China to let the yuan to move more freely.
To avoid such friction, lawmakers, not bureaucrats, should be working harder, Shirakawa said. “I don’t think Japan can easily have a bigger presence,” he added.
Neither the foreign-exchange market nor the strength of the yen, which has recently eased, was discussed at the G-20 finance chief and central banker meeting, some Japanese officials said. A communique after the meeting only said: “Volatility remains high partly reflecting financial market pressures in Europe.”
At a press conference after the talks, Azumi seemed to be restraining himself while boasting what Japan had achieved.
“We achieved a significant result,” he said. “I believe we made an important contribution.”
“We will provide not only money but also human resources to the IMF,” Azumi said, urging the body to award Japan with more posts commensurate with its contribution. Japan is the second-biggest stakeholder in the IMF after the United States. But Azumi also admitted the other G-20 members called on Japan to reduce its government debt and accelerate efforts to improve its fiscal health, which is the worst among major developed countries.