WASHINGTON – Horst Koehler, managing director of the International Monetary Fund, on Tuesday urged Japan’s likely new leader Junichiro Koizumi to promote restructuring of the nation’s corporate and banking sectors in “a more ambitious and expeditious” manner.
The Japanese economy will show “some growth” this year but further efforts are necessary to pull it out of a “critical phase of sluggish growth,” Koehler said.
Koehler said policy debates during the leadership race of the ruling Liberal Democratic Party clarified a “need for a more ambitious and expeditious restructuring of Japan’s corporations and banks.”
“I do think restructuring corporations and banks is issue No. 1, No. 2 and No. 3” for Japan, the IMF chief said in a meeting with reporters ahead of a series of international financial meetings opening in Washington this weekend.
Koehler emphasized the need to dispose of the huge amount of bad loans gripping Japan’s banking sector since the bubble economy burst in the early 1990s.
“The restructuring of the banks, including finding a solution to nonperforming loans, is the most important issue to build up confidence,” he said.
The IMF chief said he was encouraged to see various policy options offered during the process of electing Koizumi as the new LDP leader. It was “a step forward” for the Japanese people. Koehler said he supports the Bank of Japan’s decision last month to adopt quantitative monetary easing but added the policy “should be implemented without delay.”
“If there’s a need to be even more active about giving liquidity, they (the BOJ) should use it.”
Koehler said he has “no doubt” that the global economy will recover in the second half of 2001 or next year if major countries make the correct policy choices.
“We feel that it’s not appropriate to paint everything in negative terms or colors,” he said.
Business confidence has weakened, but consumer spending — as demonstrated in automobile sales — is still “rather robust” over the world and housing purchases are positive, he said.
By region, Europe has shown robust growth while the U.S. economy is expected to recover in the second half of this year or 2002, Koehler said.
He said there is uncertainty in the U.S. economy but the outlook ahead is bright, noting that the Federal Reserve took “very timely action” when it further eased its key short-term interest rate last week.
U.S. stock prices have undergone needed correction, while President George W. Bush’s tax proposal would help improve investor and consumer confidence in the U.S. economy, the IMF head said.
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