2003 Spring Meetings: News Releases, Speeches, Committee Papers, Documents and Background Information
Statements Given on the Occasion of the IMFC Meeting
April 12, 2003
Documents related to the International Monetary and Financial Committee (IMFC) Meeting
Japan and the IMF
Statement by Masajuro Shiokawa
Minister of Finance, Japan
and Governor of the IMF for Japan
International Monetary and Financial Committee Meeting
Washington, D.C., April 12, 2003
I The World Economic Outlook
The World Economy
While we expect the world economy to remain on the path to recovery with the support of appropriate economic management in many countries, the pace of recovery so far is modest. Of particular concern is the possible impact on the world economy of the uncertainties associated with the war in Iraq. We therefore need to remain vigilant against adverse developments and to take appropriate measures in response to changing economic circumstances with a view to preventing turmoil in the global economic and financial systems.
Recently, some emerging market economies such as Argentina and Turkey have been hit by economic crises. We commend the progress that has been made toward the resolution of these crises through the countries' own efforts and with the help of the IMF and other international financial institutions. However, market confidence in these countries has not yet been fully restored. We hope that these countries will make further efforts at economic reform, with a view to restoring market confidence promptly and resolving underlying structural problems, thereby achieving sustainable economic growth.
The Japanese Economy
There are signs of recovery in the Japanese economy, such as an improvement in business activities owing to an increase in corporate profits, even though uncertainties related to the developments in Iraq, among others, remain.
Against this background, Parliament recently approved the FY2003 budget, which includes advance tax cuts of 1.8 trillion yen. The Government is now steadily implementing this budget, while at the same time implementing the FY 2002 supplementary budget. The Government will also continue its efforts toward financial and corporate restructuring by accelerating the disposal of non-performing loans, as well as its efforts toward regulatory reform.
While closely watching the economic and financial situation both at home and abroad, the Government and the Bank of Japan are making efforts in an integrated manner to secure the stability of the financial and capital markets and to overcome deflation, both of which are indispensable for the revitalization of the Japanese economy. Through these measures, we are determined to achieve domestic-demand-led sustainable growth.
II Strengthening the International Financial System
There have been a number of financial crises over the past few years, including the Asian crisis in the late 1990s and, more recently, the economic crises in Argentina and Turkey. We therefore need to further strengthen measures for crisis prevention and resolution.
On crisis prevention, the main issues we need to address are (i) strengthening the IMF's surveillance function including advice on appropriate exchange rate regime and debt sustainability analysis; (ii) effective synthesis of the Financial Sector Assessment Program (FSAP) into the IMF's macroeconomic surveillance; and (iii) the establishment of international standards and codes and enhanced effectiveness of observance assessments, while taking into account the differing stages of economic development of each country. Although the Contingent Credit Line (CCL), a facility for crisis prevention, is due to expire at the end of November 2003, effective measures to promote sound policies and to prevent contagion continue to be needed. I look forward to the IMF's study of such measures and its proposals.
For crisis resolution, it is essential to promptly restore the debt sustainability of a country in crisis through an appropriate combination of policy adjustment, official lending from the IMF and other international financial institutions, and private sector involvement (PSI), including debt restructuring as necessary.
With regard to IMF lending, I welcome the progress that has been made in strengthening the criteria and procedures for exceptional access to IMF resources, including a more rigorous analysis of debt sustainability, in order to restrict such access to truly exceptional cases. I also welcome the discussion on establishing a strong presumption that exceptional access in capital account crises should be provided under the Supplemental Reserve Facility (SRF).
I highly commend the IMF's study on the Sovereign Debt Restructuring Mechanism (SDRM) and its report on a concrete proposal to this Committee. Significant progress has also been made toward the introduction of collective action clauses (CACs) in sovereign bond contracts. In this regard, I welcome the Mexican governments' decision to introduce CACs in its sovereign bond issues in the New York market. I hope that other countries will follow suit in their sovereign bond issues under foreign jurisdiction. I hope that further study will be made on such issues as aggregation in the context of achieving a more orderly process of sovereign debt restructuring. As for a Code of Good Conduct for crisis resolution, I hope that the discussion will proceed with the participation of all interested parties including debtor countries, the private sector, creditor countries, and international financial institutions.
For effective crisis resolution, it is essential that the IMF maintain a sufficient level of financial resources. I would therefore like to reiterate that discussion on a quota increase should resume soon under the current Thirteenth General Review of Quotas. The distribution of quotas should reflect the current situation of the world economy, and we should pay due regard to this in the review of quotas.
III Measures against the Financing of Terrorism
The threat of terrorism remains serious. It is therefore important for the international community to strengthen measures to combat the financing of terrorism. I welcome the substantial progress of the assessments of member countries' compliance with AML/CFT (anti-money laundering and combating the financing of terrorism) standard using the comprehensive methodology in the context of a 12-month pilot program by the IMF and the World Bank.
Based on the results of assessments, it is also important to provide technical assistance, including by sending experts, in order to strengthen the implementation of member countries' AML/CFT measures. Japan will continue to actively contribute to such activities.