Speech

Opening Remarks for a Press Conference on Japan
Symposium to Commemorate the 50^th Anniversary of Japan's Membership in the International Monetary Fund and the World Bank
By Horst Köhler, Managing Director
International Monetary Fund
Imperial Hotel, Tokyo, September 10, 2002

Good afternoon. It is a pleasure to meet with you today. I am very happy to be here in Japan again, and especially to have been able to participate in the commemoration of the 50^th Anniversary of Japan's membership in the IMF and the World Bank. I was greatly honored to be able to participate in this event together with former Prime Minister Miyazawa, and I am grateful to the Ministry of Finance and the Bank of Japan for hosting it.

In my own remarks, I emphasized that globalization has immense potential to help to raise standards of living and reduce world poverty. But it also brings risks and uncertainties. I stressed the need to work for a better globalization, by defining a policy concept for one world—one that promotes broadly shared growth, respects environmental sustainability, values the richness and diversity of human experience, and helps to fight poverty.

Japan's own experience over the past 50 years demonstrates the benefits of integration into the global trading and financial system. Japan's remarkable transformation is sometimes lost sight of because of its recent economic difficulties. But the transformation from postwar ruin into one of the world's richest countries with a position of global leadership remains a fact. Indeed, Japan is a major force in the world economy, and especially in the Asian region, and the second-largest shareholder in the IMF with an essential voice in shaping our policies. The Japanese people have every reason to be proud of their country's achievements and its role in the international financial community.

Of course, I did not come to Tokyo only for this important commemoration. I have also come for a regular meeting of the IMF's Capital Markets Consultative Group, a forum established two years ago as an informal, but regular channel of communication between international capital markets participants and IMF management. This was our fifth meeting; we meet twice a year around the world, and this time it was Tokyo's turn. The next session will be in Madrid early next year.

Most importantly, during my visit I also have held a series of meetings with the senior leaders of the Japanese government, business community and the labor unions. I have met with Prime Minister Koizumi, Finance Minister Shiokawa, Bank of Japan Governor Hayami, Financial Services Minister Yanagisawa, and Minister of State Takenaka. I also met with Mr. Okuda, the head of Keidanren, and Mr. Sasamori, the head of Rengo.

I was very encouraged to hear Prime Minister Koizumi reaffirm his absolute conviction that Japan needs to move forward with structural reforms to improve the fundamentals for growth, and to persevere with this reform agenda over the long term. This is indispensable for rebuilding confidence, sustained economic growth and job creation. It is clear that the Prime Minister knows what the current difficulties demand. It is a comprehensive strategy with absolute priority on decisive bank and corporate restructuring in the context of a supportive macroeconomic policy.

Banks' nonperforming loans have to be disposed of quickly; excessive corporate debt has to be worked out without delay, and corporate operational restructuring needs to be accelerated, including among small-and medium-sized enterprises. In the short run, such a policy needs to be complemented by a strengthening of the social safety net. A key objective must be to foster entrepreneurship and innovation, and to make more effective use of the existing large pool of savings. This is the way for Japan to strengthen its own domestic sources of economic growth over the medium term; this is what will provide the fundamental strength to the stock market.

In my view, there are no reasons to be over-pessimistic. Japan has a tremendous wealth of creativity and resources to draw upon, so I think the future can be quite positive.

The discussions I had in Tokyo over the last two days have confirmed to me that Japan remains committed to meeting its leadership responsibilities as an important member of the international community. There is no question that the advanced economies, including Japan, have a special role to play in ensuring strong, stable and equitable growth in their own economies—and world-wide. Indeed, the IMF looks forward to working closely with Japan as we face the challenges of the 21^st century together.

And now, I will be happy to answer your questions.