Japan PM unveils anti-crisis steps ahead of summit
14 Nov 2008 04:09:00 GMT Source: Reuters
(For more on the G20 leaders summit click on [G7/G8]) (Adds comments, background, changes dateline) (Adds comments, background, changes dateline) By Yoko Nishikawa WASHINGTON, Nov 13 (Reuters) - Japan proposed a raft of steps on Thursday to help overcome the global financial crisis and avoid a future meltdown, including an offer to boost the IMF's firepower and a call for tougher supervision of credit rating agencies. In a position paper released ahead of a leaders' summit of the Group of 20 leading industrial and emerging nations in Washington, Prime Minister Taro Aso said Tokyo would continue to support the dollar-based currency system despite what he said were market concerns about its outlook as U.S. economic power declines. [ID:nT275335] Japan, which holds the world's second largest foreign reserves at $980 billion, would be ready to lend up to $100 billion to the International Monetary Fund (IMF) to assist emerging economies if the Washington-based lender finds itself with insufficient funds, Aso said. Japan, frustrated with how the IMF has handled the current crisis as well as the 1997/98 Asian financial crisis, has been calling for improvements in the institution's ability to monitor financial markets and detect signs of a crisis at an early stage. But aware that such criticism alone is not sufficient to address the problem, Japan will also propose doubling the IMF's quota, or financial resources, to $640 billion from the current $320 billion, a government source told Reuters. Japan, which had to learn its lessons the hard way from its halting response to tackling its own financial crisis in the 1990s, believes its experience could be a useful guide to tackling the current global financial crisis. Aso said other nations should consider clarifying management responsibility when injecting public funds into banks, and adopt fair valuation and early disclosure of non-performing loans and push for removal of those loans from banks' balance sheets. "At present, capital flows have become so global that they can occur instantaneously to take advantage of any differences that may exist among the regulations of various countries," Aso said in the position paper. "Concerted action to help converge each country's various policy efforts to prevent a recurrence of the financial crisis is now an unavoidable challenge," he said. The G20 summit in Washington on Friday and Saturday will discuss a possible overhaul of the 60-year-old Bretton Woods financial architecture, which created the World Bank to help rebuild Europe after World War II and the IMF to oversee a global economic system based on fixed exchange rates. Before heading to the U.S. capital, Aso told a parliamentary committee on Thursday in Tokyo that creating a new financial architecture is not an overnight job. "The Bretton Woods system was not established right away and another system like that cannot be easily established," he said. On the role of the IMF, Aso distanced himself from the view of some European officials that the Washington-based lender should be entrusted with primary responsibility over financial regulation. Instead, Aso said in his paper that the Financial Stability Forum (FSF) should be given a clear status above standard-setting international organizations such as the Basel Committee, adding that the forum's work with the IMF should be reinforced. He said more emerging nations should belong to the FSF, whose members include international bodies and the Group of Seven nations plus Australia, Hong Kong, the Netherlands, Singapore and Switzerland. In a proposal that may not sit well with the U.S. free-market focus, Aso said there should be discussions on providing legal authority to government officials over rules on credit rating agencies. He also called for fostering local credit rating agencies and for further development of regional schemes to help provide dollar funding as in Asia's web of currency swap agreements, the Chiang Mai Initiative. But he stressed that "open regionalism complements globalism in a positive sense."
