Tokyo: Japan is ready to lend up to $100 billion to the International Monetary Fund to support nations reeling from the global financial crisis, its prime minister said Friday in a newspaper column ahead a Group20 summit in Washington.
Prime Minister Taro Aso described the current turmoil as “the financial crisis of the century” and urged global leaders to “hammer out realistic yet substantive countermeasures,” according to a column in the Wall Street Journal.
He called for improvements in the IMF’s role in monitoring financial markets and detecting potential crises early.
“Also, the Fund’s financial resources must be increased to enable it to extend necessary assistance to emerging economies that drive world growth,” Aso wrote. “Japan is prepared to lend up to $100 billion to the Fund as an interim measure before a capital increase takes place.”
Amid the unfolding crisis, Japan has been eager to boost its international clout by helping to stabilize the world’s financial system.
“In the near term, Japan’s own experience with the bursting of a bubble economy, a subsequent financial crisis and a recovery process could serve as a useful guide” for other countries,” Aso said.
Officials in Tokyo have repeatedly said Japan, with its nearly $1 trillion in foreign currency reserves, is ready to provide funds to the IMF if it needs more money for rescue packages. But they had previously not given an amount.
A Japanese government official said that Aso will extend the $100 billion loan offer at the G-20 meeting this weekend in Washington. He asked to not to be identified, citing government protocol.
The Washington-based IMF has dipped into its reserves fund to provide emergency loans to Iceland, Hungary and Ukraine worth more than $30 billion.
Finance Minister Shoichi Nakagawa said last month that Japan would offer cash along with proposals about accounting standards and other regulatory changes needed to reform the international financial system.
The IMF has about $210 billion but that may not be enough, he said.
Aso also said in his column that he wanted to see a general capital increase for the Asian Development Bank, “which currently has limited scope for new lending.”
The G20 summit this weekend will bring together leaders from 20 of the world’s biggest developed and developing economies to discuss ways to tackle the global financial crisis, including possible coordinated tax cuts or spending increases around the world.
The Paris-based Organization for Economic Cooperation and Development forecast that economic output would shrink 1.4% this quarter for the 30 market democracies that make up its membership - and keep contracting until the middle of next year.
That would mean the developed world has now entered a slump estimated to last at least three quarters; two consecutive quarters is a common definition of recession. For all of 2009, these countries’ economies would contract by 0.3%.