|
IMF: Japan needn't tighten
|
 |
April 13, 2000: 12:28 p.m. ET
Acting director sees no reason for Tokyo to tighten rates at this time
By Staff Writer M. Corey Goldman
|
WASHINGTON (CNNfn) - Japan should hold off raising short-term interest rates for now since the nation is only just beginning to recover from a 10-year recession, the acting head of the International Monetary Fund said Thursday.
Briefing reporters on the agenda for this weekend's IMF, World Bank and Group of Seven ministerial meetings, acting IMF managing director Stanley Fischer cautioned that Japan could fall back on its britches if the central bank there begins to raise rates. Currently Japanese interest rates are at zero.
"The recovery is not firmly in place," Fischer said. "There is no reason to withdraw stimulus right now. The need is to make sure that the recovery in Japan is self-sustained -- and that means it's hard to see any good reason for monetary policy to tighten."
Japanese officials have been toying with the idea of raising their benchmark lending rate to avoid deflation -- a phenomenon in which prices for goods and services actually decline. The rate has remained at essentially zero for several years in order to encourage Japanese citizens and companies to borrow cheaply and boost economic output.
Japan still fragile
However, because the Japanese economy is still in such a fragile state, raising rates could send it back into recession, Fischer cautioned. "To tighten monetary policy under those circumstances is difficult to understand," he said.
 His comments came following a question-and-answer session for reporters detailing the International Monetary and Financial Committee, or IMFC's, upcoming meetings with ministers of the Group of Seven and Group of 24 nations. Those meetings take place on Saturday and Sunday.
The IMFC is the main forum through which its 182 member countries can tell the ministers what they expect them to do over the next six months.
As expected, Fischer was asked numerous questions about the activities outside the IMF's doors, in which thousands of protestors are expected to begin congregating over the next three days to protest globalization.
Protestors' antics dismissed
In response, Fischer dismissed the antics of the various demonstrators assembling outside the IMF and World Bank headquarters, though noted that many of them have valid concerns and arguments about the agency's dealings with global issues that deserve further attention.
"All the evidence suggests that the best way to grow is by integrating countries into the global economy," Fischer said. "The policies we are supporting are policies that have been shown to work -- we have not been given any plausible alternatives."
 As for the agenda this weekend, Fischer said the IMF will focus on four broad issues to discuss with its members and with the ministers.
The first will be making sure the IMF's loans aren't abused by some of the countries that receive them, Fischer said. That will include setting up independent external audits for countries that want to borrow the IMF's cash and determining that the central banks' books are in good shape.
The second issue will be discussing how the IMF can forge itself into an international crisis preventer rather than crisis responder. Fischer said members will discuss how they can redesign the internal structure of the IMF to become more accountable to their members and to the public.
The other two main themes include surveillance -- monitoring countries with fiscal problems more closely to resolve their issues before they turn into another global economic crisis -- and rounding up more private-sector involvement to get investment into some of the world's poorer regions. 
|
|
|
|
|
 |
|
