Japan vowed it will provide $60 billion in loans to the International Monetary Fund, the first non-European nation to commit money to boost the fund’s financial firepower to contain the euro zone debt crisis.
Finance Minister Jun Azumi said Japan hoped Tokyo’s contribution, which will be formally announced at a Group of 20 financial leaders’ meeting later this week, will encourage other countries to follow suit.
The IMF wants to boost its funding by $600 billion but securing firm commitments at meetings in Washington this week of the fund, the World Bank and the G20 will be difficult.
The United States has insisted it will not be part of these efforts and other economies, including emerging powers China, Brazil and Russia have been holding out.
“Following a series of euro zone’s policy responses, it is important to strengthen IMF funding and pave the way for ensuring an end to the crisis not only for the euro zone but also for Japan and Asian countries,” Azumi told a regular news conference after a cabinet meeting.
“I am confident that many other countries will pledge contributions to the IMF,” he said, while acknowledging it will be “difficult” for all countries to commit to a contribution this week.
The IMF, which acts as a lender of last resort for governments, said in January it would need $600 billion in new resources to help “innocent bystanders” who might be affected by economic and financial spillovers from Europe.
IMF Managing Director Christine Lagarde said last week it might not need as much money as it had thought because economic risks had waned. G20 officials said the world’s major economies were likely to agree to provide between $400 billion and $500 billion.
“I am grateful for Japan’s leadership and strong commitment to multilateralism, and I call on the broader fund membership to follow Japan’s lead,” Lagarde said after Japan’s announcement.
Euro zone countries have committed about $200 billion and other European Union nations an additional $50 billion.
The United States, heading towards a presidential election in November in which the country’s hefty budget deficit is a key topic, has said it won’t offer new funds.
Canada has insisted it is not interested in contributing to a fund to bail out Europe, which it says has enough of its own resources to deal with the crisis. China, Brazil and Russia have said they are willing to chip in but were looking to get more voting power in return. Azumi said he consulted with Chinese Vice Premier Wang Qishan on Monday and that there was no gap between the two countries on IMF funding.
Japan’s announcement comes ahead of the IMF and World Bank Spring Meeting and a G20 finance leaders’ meeting in Washington. The meetings run from Friday to Sunday.
Azumi underlined Japan’s long-standing position that Europe needed to do more to combat the debt crisis.
“I don’t think Europe has made enough efforts on their own,” Azumi said. “I must urge them to beef up their firewall further. At the same time the world is in need of strengthening IMF lending, so Japan has been taking the lead in coordinating opinions with other countries concerned.”
Financial markets are showing increased concern about the debt crisis.
Spain’s 10-year government bond yields rose above 6 percent on Monday for the first time since the beginning of December, reflecting worries about the health of some Spanish banks and that Madrid could fail to meet budget deficit targets.
That would raise the risk that the euro zone’s fourth-largest economy, which Spain has said is probably in its second recession since 2009, might need an international bailout, Reuters reported.