NEW YORK – IMF Managing Director Christine Lagarde said the Bank of Japan’s recently announced new monetary easing is “a positive step.”
In a speech Wednesday at the Economic Club of New York, the head of the International Monetary Fund noted the emergence of a “three-speed” global economy: countries doing well, those on the mend and others that have yet to achieve economic recovery since the 2008 global financial crisis triggered by the collapse of U.S. investment bank Lehman Brothers.
Lagarde labeled Japan and eurozone countries mired in a long-running sovereign debt crisis as among those that “still have some distance to travel” in terms of economic recovery. “Japan needs to rely more on monetary policy to kick-start growth,” she said.
But in order to succeed, “Japan needs a clear and credible plan to lower public debt over the medium term,” since its public debt is approaching 245 percent of gross domestic product, Lagarde warned.
WTO monitoring actions
World Trade Organization Director General Pascal Lamy said his group will carefully watch whether or not the Bank of Japan’s bold quantitative easing measures drag Japan out of deflation.
“Monetary easing is one of the available tools,” Lamy told a news conference at the WTO headquarters in Geneva. But he quickly added that taking such a step is “fine as long as this is coordinated” with other Group of 20 economies.
“I have to presume, which we all have to do, that Japan abides by the commitments it has taken within the G-20 at not to use stimulations that artificially result in a specific comparative advantage,” Lamy said.
In its 2013 global trade report released the same day, the WTO pointed out Japan’s more accommodative monetary policy, aimed at spurring economic growth, “may invite charges of currency manipulation.”