The push by Prime Minister Yoshihiko Noda and his administration to raise the consumption tax is a key step that “will make the Japanese economy more agile and efficient,” Christine Lagarde, managing director of the International Monetary Fund, said Friday in Tokyo.
Appearing at a news conference, the IMF chief revealed that the topic came up during a meeting with Noda earlier in the day. The tax hike “is a project that the IMF has always supported, and I had a chance to congratulate the prime minister” for the recent progress, Lagarde said.
She stressed that more measures will be needed to clear Japan’s bloated debt, but a tax hike will be a key step in the right direction.
“It has been in the making for a long time . . . (but the tax hike) will be important to increase income and reduce the deficit,” she said, adding that the measure and its timing are appropriate.
Lagarde, making a stop in Tokyo during a tour of Asian countries that includes Indonesia and Thailand, also touched on the continued appreciation of the yen.
“The yen is moderately overvalued,” she said, adding that further deterioration of the global economy, particularly stemming from Europe’s sovereign debt issues, may contribute to the yen gaining strength as a safe haven.
On Japan’s $60 billion contribution in April to the IMF’s new crisis fund, Lagarde said the organization is thankful not only for the size of the pledge but for Japan playing a key role in encouraging other countries to follow suit.
Lagarde’s visit is also aimed at preparing for the IMF-World Bank annual meeting in October that will be held in Japan for the first time since 1964.
Azumi presses Europe
Japan wants to see further developments in Europe to solve the fiscal and banking problems in the eurozone, Finance Minister Jun Azumi said Friday, indicating he hopes an agreement can be reached by October when Tokyo will host key international meetings.
“We can’t deny that financial markets will not be reassured until (European leaders) agree on a certain direction or conclusion on the issues that remain a source of conflict,” Azumi said, calling for a road map toward a closer union with single banking supervision and fiscal rules.
“I personally believe it is favorable that they aim to achieve a goal ahead of such occasions as the general meetings of the International Monetary Fund and the World Bank scheduled for October in Tokyo,” he said.
European Union leaders agreed last week to have eurozone bailout funds directly inject aid to struggling banks and intervene in bond markets to help lower borrowing costs for some member countries.
“Momentum has been somewhat building among relevant countries to make a stronger push” for creating a road map, Azumi said, but he added, “It is not that the countries have made significant progress.”
He apparently discussed the issue Thursday with IMF Managing Director Christine Lagarde, who is visiting Tokyo as part of preparations for the general meetings from Oct. 12 to 14.
Azumi said he and Lagarde, a former French finance minister, are hoping there will be “good news when they meet next time in Tokyo, following various efforts by Europe.”