Two of Asia’s leading finance ministers, Japan’s Sadakazu Tanigaki and South Korea’s Kwon O-kyu, are throwing their weight behind demands for stronger action to deal with global financial imbalances.
In interviews with Emerging Markets both said they expect to see progress in Singapore on IMF quotas, but that they are more pessimistic about the prospects for action on global imbalances.
The big issues at the annual meetings are the review and reform of the Bretton Woods institutions, Tanigaki said. “Japan has been drawing attention to the unbalanced situation in terms of quotas and the need for re-balance”, he said. Reaching consensus on this issue will be difficult but it “must be properly addressed,” he insisted.
“One of the major challenges ahead is to overcome the [adverse] sentiment which has developed in Asian countries vis-a-vis the IMF,” Tanigaki said bluntly. “We are of the view that the quota allocation needs to reflect better the economic reality of each of the member economies concerned,” for the sake of preserving the IMF’s legitimacy.
Tanigiki and South Korea’s Kwon share a view that neither the G7 or the G20 finance ministers are really coming to grips with the problem of global financial imbalances.
Before being appointed finance minister and deputy prime minister in June of this year, Kwon spent two years at the OECD. He puts more faith in the ability of the Paris-based organisation to deal with the problem of global imbalances.
“When I was at the OECD at the annual Ministerial Council meeting we decided to deal with global issues,” he told Emerging Markets. Until last year, when Greece took over the chair of the council (and South Korea the vice chairmanship) the OECD concerned itself mainly with social issues.
“But in order for the OECD to be relevant to the global economy it should deal with issues such as global imbalances, and we decided to deal with these directly,” said Kwon.
“By doing that we can invite senior ministers, including finance ministers, to join our council meeting,” he noted, which means that the OECD can take on a new role, dealing with key issues such as global imbalances.
“This is a structural issue so we cannot reach a solution overnight,” he said. “Discussion is very important to make the relevant parties [more aware of the problem] and by activation of dialogue and discussion we can find some potential solutions on a long term basis”.
Tanigaki meanwhile identified “three major risk factors” facing the global economy: first, “the possibility of a mismatch between the rising concern over deflation and monetary policy which could give rise to various problems”; second, prices; and third, global financial imbalances.
Kwon said he worries about possible inflationary pressures developing on a global scale.