JAPAN IS to provide $60 billion (€45.7 billion) to the International Monetary Fund’s effort to expand its resources, pledging to lead the global effort to prevent the sovereign debt crisis in Europe from weighing on economies around the world.
Japanese finance minister Jun Azumi announced the commitment yesterday, ahead of the semi-annual meetings of the IMF and World Bank in Washington later this week.
While Europe’s crisis has eased from last year’s “critical situation”, Mr Azumi said, boosting the IMF’s resources “is crucial if we are to ensure that the crisis is completely over”.
Turmoil in the euro zone has hurt Japanese exports by damping global demand and driving the yen higher. Only since February, when the Bank of Japan weakened the currency by announcing another round of monetary easing, has the world’s third-largest economy enjoyed some relief.
Japan is the first non-European nation to commit money to the IMF effort. Mr Azumi however said Tokyo’s contribution, which will come in the form of loans from the country’s $1.2 trillion of foreign exchange reserves, should encourage other non-European IMF members such as China, Brazil and Russia to follow suit.
The offer from Japan, the second-biggest stakeholder in the IMF after the US, is expected to be “by far the largest” among them, he said.
IMF managing director Christine Lagarde called on other nations to “follow Japan’s lead”. The fund, which originally sought an extra $600 billion to promote global economic stability, has so far received pledges from euro zone members of $200 billion.
This is not the first time Japan has led efforts to support the IMF.
In 2008, after the collapse of Lehman Brothers, then prime minister Taro Aso offered the IMF up to $100 billion in temporary funds, while calling on other countries to inject additional permanent capital to help emerging economies weather the global crisis.
Japan has grown more supportive of the IMF’s expansion plans after the recent agreement among euro zone finance ministers to raise the ceiling for their rescue funds to €700 billion. – (Copyright The Financial Times Limited 2012)
