Japan is hosting annual meetings of the International Monetary Fund and the World Bank this week, with some 20,000 people from 188 countries taking part. The meetings are taking place at a time when the European sovereign debt problems, uncertainty about the U.S. economy and slowing down of the Chinese and other emerging and developing economies are casting clouds over the global economy. It is hoped that the meetings will serve as an opportunity for the participating countries to deepen their cooperation to prevent a recurrence of a financial calamity like the Lehman Brothers shock of 2008, which triggered a global economic crisis.
The world economy has been struggling to put itself on a path of strong recovery since the Lehman Brothers shock. The effects of the European sovereign debt crisis, which started with the government change in Greece in October 2009, are continuing. Despite strong support measures for European countries suffering from sovereign debt problems, prospects for the settlement of the European crisis remain unclear.
The IMF and World Bank meetings will offer financial ministers and central bankers from various countries a chance to discuss subsequent steps to resolve the crisis in Europe, which is having a negative impact on other economies. Important themes at the meetings will include how to attain sustainable economic growth as the world economy grapples with the impact of globalization and how to resolve the conflict between the need to reduce government debt while ensuring the well-being of the people.
This year marks the 60th anniversary of Japan joining the IMF and the World Bank in 1952, a year after the signing of the San Francisco Peace Treaty, which brought an official end to World War II. Japan hosted annual meetings of the IMF and the World Bank meetings once before in 1964. That year was a remarkable one for Japan in economic terms as Japan joined the Organization for Economic Cooperation and Development, hosted the Tokyo Olympics and started the operation of the Shinkansen superexpress trains. Assistance from the IMF and the World Bank laid the foundation for Japan’s postwar economic development. The World Bank helped Japan construct thermal power stations in Kansai, Kyushu and Chubu, the Tokaido Shinkansen railway line and the Tomei Expressway.
In fiscal 1964, Japan’s per capita gross domestic product was ¥310,000. While it increased to ¥3,680,000 in fiscal 2011, Japan’s economic growth rate in real terms dropped from 9.5 percent in 1964 to negative growth in fiscal 2011. The IMF and World Bank meetings are taking place as Japan is struggling to recover from the effects of the 3/11 disasters and the Fukushima nuclear crisis. In Sendai, Japan and the World Bank are holding a meeting on disaster prevention and development. It is hoped that Japan can play a positive role by providing technological assistance on earthquake-proof measures and measures to cope with tsunamis, and developing a framework to disburse funds to strengthen disaster prevention measures in developing countries.
From the 1990s to the 2000s, Japan experienced a lost decade due to the burst of its economic bubble and the resulting financial crisis, and has become the only developed country to suffer from deflation. Japan should take advantage of the IMF and World Bank meetings and help deepen discussions on what went wrong with its economy and offer a clue as to how to prevent the recurrence of the mistake that it committed.
Tokyo is still the No. 2 fund provider for the IMF and the World Bank. The meetings of the two institutions also present a chance for Japan to consider what contributions it can make to help stabilize the global economy.
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