The world's finance ministers and central bank heads
are meeting this week in Tokyo for the annual meetings of the
International Monetary Fund (IMF) and World Bank Group with the
eurozone debt crisis the dominant theme.
Other items on the agenda are growing government debt, the failure
of many countries to undertake structural reforms and the slow pace
of IMF reforms aimed at having the international lender better
reflect the increasing influence of emerging economies and
globalization.
Eurozone debt crisis
Whether Greece would receive the next tranche of aid from its
international donors in Europe and the IMF remained unclear. Athens
has to comply with demands for spending cuts the lenders have
imposed. If the tranche amounting to 31.5 billion euros (40.5 billion
dollars) is not paid, Greece faces bankruptcy and exclusion from the
eurozone.
Expectations are that the money would be paid in the end to retain
Greece in the eurozone, but it was also unclear whether and when
Spain, which is already tapping into eurozone loans to bail out its
banks, would apply for a full bailout.
Global economy
The IMF on Tuesday downgraded its global economic growth forecasts
once more, predicting a 3.3-per-cent expansion for 2012, down from a
July projection of 3.5 per cent, and 3.6-per-cent growth in 2013,
down from 3.9 per cent, while warning that growth would be cut
further if European and US officials fail to stem their economic
crises.
Further structural reforms could be advocated, and in the view of
the IMF, the process towards creating a eurozone banking union is
proceeding too slowly.
Boosting IMF funding
The war chest to fund the IMF's firewall against global economic
crises is to be increased by 456 billion dollars, raising the total
funds to more than 1 trillion dollars. Eurozone countries have
pledged 150 billion dollars in additional bilateral loans. The United
States has declined to increase its contribution.
Quota reform
Industrializing countries are linking their increased IMF
contributions to a reallocation of IMF voting rights. Quota reforms
agreed to in 2010 and aimed at changing the relationships between
older and newer economic powers was to have been in place by the
autumn of this year. However, implementation of the voting reforms
has been delayed.
The reforms would mean that China, the world's second-largest
economy after the US and ahead of Japan, would push Germany out of
third place among IMF shareholders.
Imbalances
Global imbalances among the economic powers are a constant theme
of discussion. China and Germany are under fire because of their
long-running trade surpluses with critics saying they are doing too
little to stimulate domestic demand and private consumption.
Exchange rates/capital transfers
China could be called on once again to ease controls on its
currency. The US and the Europeans in particular accused China of
keeping the value of its currency artificially low with the aim of
securing an export advantage.
Hosts Japan could bring the strength of the yen up for discussion.
Tokyo was hoping that the leading industrialized nations of the Group
of Seven, who are to meet on the sidelines of the IMF and World Bank
meetings, would help Japan lower the value of its currency and boost
its lagging economic recovery.
The yen continued to be seen as a "safe haven" currency despite
Japan's soaring national debt of 230 to 240 per cent of its gross
domestic product.
Developing countries are also battling rises in the value of their
currencies as "cheap" money from the industrialized world seeks
investment opportunities.
China/Japan
The conflict between China and Japan over a group of uninhabited
islands in the East China Sea threatens to overshadow the Tokyo
meetings. At the last minute, China said its finance minister and
central bank head would not be attending. A Japanese government
spokesman expressed regret at the decision.
