Japan and China will seek to coordinate on supporting the International Monetary Fund’s effort to contain Europe’s debt crisis, Japanese Finance Minister Jun Azumi said.
“Rather than make decisions independently, we’ve agreed to consult each other very closely” on financial contributions to the IMF, Azumi told reporters today after meeting with Chinese Finance Minister Xie Xuren in Tokyo.
The finance ministers of Asia’s two largest economies met before the Group of 20 countries gathering later this month in Washington. One topic at the G-20 meeting will be increasing cooperation with the IMF. The Fund needs more resources to shield the global economy from threats of strains on Europe’s financial system, rising oil prices and high unemployment, Managing Director Christine Lagarde said this week.
“It won’t probably be smooth for G-20 nations to hammer out details for their contributions to the IMF,” Tomoko Fujii, a senior foreign-exchange strategist at Bank of America Merrill Lynch in Tokyo, said before Azumi and Xie met. “It’s important for Japan to check China’s intention on this, while China probably wants to increase its political influence if it puts up money.”
The IMF asked in January for as much as $500 billion in additional lending resources. Member countries have been reluctant to pitch until European nations did more to help themselves. The U.S. has refused to increase its contribution to the fund.
Concerns about Europe’s debt crisis were rekindled this week as Spain’s borrowing costs surged on concern that the country’s public debt will expand and the region’s fourth- largest economy may ask for a bailout. Yields on Spain’s 10-year bonds rose to a four-month high.
“Europe’s crisis hasn’t ended” even as the situation improves from last year, Azumi said today. “This still needs careful monitoring and we can’t yet become optimistic.” Japan and China have yet to decide on cooperation with the IMF, and will continue their discussions on this until the G-20 meeting, Azumi said today. The nations agreed to strengthen and expand Asia’s regional currency swap agreement, sharing a view that “there is a need for Japan and China to cooperate to prevent crisis in Asia,” he said.
Possible G-20 support for the global economy could be similar to a G-20 decision in April 2009 to triple the fund’s resources as part of plan to avoid the global economy from slipping into a recession. At the time, the U.S. and Japan each contributed $100 billion, the EU $178 billion and China $50 billion, Bloomberg reported.