The International Monetary Fund and the World Bank will hold their annual meetings in Tokyo this week, where topics will include the eurozone debt crisis and the global economic slowdown. IMF chief Christine Lagarde warned that policy uncertainty is weighing economic growth down, despite recent initiatives by central banks, which include the European Central Bank's bond-purchasing programme and the Bank of Japan's expansion of its asset-purchase programme.
Lagarde said key policy challenges include the eurozone debt crisis, US debt concerns and the economic slowdown in emerging economies.
"Europe obviously remains the epicentre of the crisis and where the most urgent action is needed," she said, speaking ahead of the meetings.
She urged European leaders to deliver on commitments including a single supervisory banking mechanism, the direct recapitalization of banks and implementation of the European Stability Mechanism.
Lagarde also pointed out that another major risk to the world economy is in the United States, where "current law implies a dramatic tightening of the deficit by about 4 per cent of (gross domestic product) next year" in the event of a "failure to reach a deal on raising the debt ceiling"
She urged US action to avert this so-called "fiscal cliff" and called for a plan "to bring down debt gradually over the medium term."
Lagarde said emerging economies such as China are now slowing, and called for them to counter domestic and external weaknesses.
Nearly 20,000 participants, including officials from 188 member countries, their central banks, private sectors and international organizations, will attend the meetings in the Japanese capital.
The week-long event starting Tuesday involves dozens of meetings ranging from sovereign risk, management of natural resources and measures to support developing countries.
The event comes amid bickering between Asia's two biggest economic powers over a group of uninhabited islets in the East China Sea, which are administered by Japan but also claimed by Taiwan and China.
Japan's purchase of three of them from a private owner triggered anti-Japan protests in many Chinese cities in mid-September.
"Both China and Japan are key economic drivers that do not want to be distracted by territorial division," Lagarde said in Washington.
"The current status of the economy and the global economy needs both Japan and China fully engaged."
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