Bloomberg News

Japan Urges Bigger Euro-Crisis Firewall Before G-20 in April

February 26, 2012

Jun Azumi, Japan’s finance minister, wants Europe to widen measures preventing the spread of its debt crisis before global finance chiefs reconvene to discuss the International Monetary Fund’s expansion in April.

“We expect talks on expanding IMF resources will develop on the premise that we can create a solution to the European crisis ahead of the G-20 meeting in April,” Azumi told reporters after attending a meeting of finance chiefs and central bank governors in Mexico.

Group of 20 finance officials shared the view Europe must do more to contain its crisis as the two-day meeting kicked off on Feb. 25, Azumi said. Greece’s second bailout and the Bank of Japan’s easing measures this month have helped to weaken the yen, reducing concerns about the country’s corporate profits and an economic recovery from last year’s record earthquake.

“Japan has its own interest in the European crisis as it has been a major reason for the yen’s appreciation,” Takahide Kiuchi, chief economist at Nomura Securities Co., said before the meeting. “G-20 members seem to be on the same page: Europe needs to do more and then they are ready to help.”

More Effort Needed

The U.S. and China have also said the world’s two largest economies want to see more effort from Europe before discussing details of IMF resources. U.S. Treasury Secretary Timothy F. Geithner urged Europe in a speech to step up its actions and make its crisis-fighting commitments “credible.”

Japan’s finance chief said G-20 nations didn’t discuss details of how to help Europe through the IMF at the Feb. 25 session, after the fund proposed last month to boost its lending by as much as $500 billion to insulate the global economy against any deterioration of Europe’s sovereign crisis.

The region has to boost its European Financial Stability Facility and European Stability Mechanism for Japan to step up help in the region, Azumi said. He didn’t discuss specifics of IMF expansion during bilateral meetings with Geithner and IMF Managing Director Christine Lagarde, Azumi said.

“We have some things we need to keep discussing,” Azumi said of European support through the IMF. What the IMF expects Japan and China to do to help increase its resources, and what Japan and China think isn’t completely matched, he said without elaborating on the differences.

Japan and China agreed to cooperate to assist Europe in solving its debt crisis through the IMF, and share the view that Europe needs to create a bigger financial firewall, Azumi said in Beijing on Feb. 19.

Japan Concerns Ease

A European agreement for a 130 billion euro bailout plan for Greece last week and the Bank of Japan’s unexpected action on Feb. 14 to increase buying of government bonds by 10 trillion yen have helped the yen to weaken and boosted Japanese stocks.

The yen touched 81.22 against the dollar last week, the weakest since July 8, after it rose to a post World War II high of 75.35 in October. Japan has conducted six interventions to address the yen appreciation since August, according to the latest government reports.

While measures including the most recent Greece bailout are helping ease investor concerns, “I pointed out there is a limit to the length of time policies can buy,” Bank of Japan (8301) Masaaki Shirakawa said in the joint press conference with Azumi. “I urged continuous efforts to create a clear path” to address the debt problems at the G-20 meeting, he said.

To contact the reporters on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.


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