Financial Turbulence and the Global Financial System

A Pre-G8 Finance Ministers' Meeting Symposium

Symposium jointly organized by the IMF Regional Office for Asia and the Pacific and Japan's Ministry of Finance
May 20, 2008, Tokyo, Japan

The IMF Regional Office for Asia and the Pacific and Japan's Ministry of Finance co-hosted Pre-G8 Finance Ministers' Meeting Symposium on "Financial Turbulence and the Global Financial System," which took place in Tokyo on May 20, 2008. The symposium featured presentations and discussions by the IMF and MOF senior officials, distinguished scholars and practitioners as well as an address from Finance Minster Fukushiro Nukaga.

The main theme of this symposium was to discuss the immediate and longer-run issues raised by the recent financial turmoil. The first session looked at the unfolding crisis and the responses, contrasting it with the Japanese financial crisis from a decade ago, while the second session took a step back and discusses the possible structural changes in the global financial markets and the challenges arising from such shifts in the financial landscape.

This website contains papers and web links to papers that were presented at the conference. The views expressed in these papers are those of the authors only, and the presence of them, or of links to them, on the IMF website does not imply that the IMF, its Executive Board, or its management endorses or shares the views expressed in the papers.


Tuesday, May 20, 2008
8:30am-8:50am Registration
9:00am-9:10am Opening Remarks
Mr. Naoyuki Shinohara (Vice Minister of Finance for International Affairs, Ministry of Finance, Japan)
9:10am-10:40am Session 1: Sub-prime crisis - lessons from Japan's financial crisis
  Japan's financial crisis erupted in 1997 and its resolution took almost a decade. The dislocations in the financial system that drove the crisis has many similarities with what has been happening in the current financial market turmoil - uncertainties in the valuation of assets and the health of financial institutions' balance sheets, mistrust in counterparties and freezing up of money markets, potential downward spiral of asset prices through forced sales from illiquid institutions, and capital crunch leading to a credit crunch. Conventional monetary policies were judged to be insufficient, and the central bank took a number of non-conventional measures that allowed it to effectively intermediate funds through central bank balance sheets rather than through the non-functional money markets. Injection of public money through various channels were tried, including through support and in some cases nationalization of systemically important institutions and purchase of financial assets to support the market as well as to facilitate restructuring. What are similar, and what are different between the current episode and Japan's experience? What can we learn from the lessons of the Japanese crisis to deal with the current turmoil?

Moderator: Mr. David Pilling (Tokyo Bureau Chief, Financial Times)

Lead Speaker: Prof. Kazuo Ueda (Professor, The University of Tokyo)

Discussants: Prof. Kazumasa Iwata (Emeritus Professor, The University of Tokyo and Former Deputy Governor, Bank of Japan)

Mr. Paul Sheard (Managing Director & Global Chief Economist, Lehman Brothers, Inc.)
10:40am-10:55am Address by Finance Minister Fukushiro Nukaga
10:55am-11:10am Coffee Break
11:10am-12:40pm Session 2: Changing landscape of global finance and capital flows
  The financial and capital market structure that accompanied the global growth model of recent years has been that of the United States and other mature market financial centers acting as the intermediary for the world. The United States received capital inflows in excess of what would be required to finance its current account deficit, mainly in low-return, low-risk debt instrument, and recycled it to the world in the form of high-return, high-risk, equity investments. The intermediary role of the U.S. market has been supported by a rapid development in financial innovation and heightened risk appetite in a period of unprecedented abundance of liquidity. Slowing growth in the US and dollar depreciation necessary to correct unsustainable global imbalances, combined with freezing up of the US financial markets could make this pattern untenable. We have at the same time seen the expansion of sovereign wealth funds, which is also playing a role in injecting capital into the ailing financial system. Do these developments indicate an underlying shift in the structure of how capital moves internationally? How do they fit in with the longer-term changes in the world economy including the ascension of emerging markets, demographic trends and other factors? What do they mean for the role of key currencies in the international monetary system?

Moderator: Mr. Akira Kojima (Chairman, Japan Center for Economic Research)

Lead Speaker: Mr.Daniel Citrin (Deputy Director, Asia and Pacific Department, IMF) on behalf of Mr. John Lipsky (First Deputy Managing Director, IMF)

Discussants: Prof. Takatoshi Ito (Professor, The University of Tokyo)
Dr. Jae-Ha Park (Chief Economist and Senior Research Fellow, Korea Institute of Finance)
Mr. Takehiko Nakao (Senior Deputy Director-General, International Bureau, Ministry of Finance, Japan)
12:40pm-12:45pm Closing Remarks
Mr. Akira Ariyoshi (Director, Regional Office for Asia and the Pacific, IMF)