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Japan: How far down? by Elson Boles 19 April 2002 21:44 UTC |
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By Bryan Shih in Tokyo Published: April 19 2002 10:29 | Last Updated: April 19 2002 10:51 | |||
Japan on Friday accused the International Monetary Fund of "meddling" in Japan's domestic affairs, and warned it would protest at the G7 meeting in Washington this weekend. "Recent remarks by the International Monetary Fund and economists are rather unexpected in our view," said Masajuro Shiokawa, Japan's finance minister, "and I will protest against that at the upcoming meetings". "It amounts to meddling with domestic affairs," he added. The IMF's biannual World Economic Outlook released on Thursday, described Japan's economy is a matter of "serious concern" for global economic health, and suggested Japan issue a supplementary budget and take stronger measures to halt deflation. A supplementary budget would run directly against the government's fiscal consolidation efforts under Junichiro Koizumi, Japan's prime minister, who promised to level Japan's mountain of debt by restricting the issuing of new government debt. The IMF's prescription also adds another dent to Mr Koizumi's reformist image, recently battered by a series of political scandals and a falling popularity rating. As such, publication left some analysts baffled. "I would think (the IMF) would be more aware of jeopardising Koizumi's reform plan," said Christopher Walker, economic analyst at Credit Suisse First Boston. The report comes at a time when Japan is particularly sensitive to outside criticism, coming on the heels of a rating cut on Japanese government bonds by Standard & Poor's earlier in the week from AA to AA-, the lowest among the G7 industrialised countries. Moody's Investors Service has warned that it could issue an even more severe ratings cut in the coming weeks, that could call in to question the investment grade of Japanese government paper. Mr Shiokawa's remarks were echoed by Heizo Takenaka, economics minister, who said: "I think their call for an extra budget is out of focus." Out of focus or not, Japan's strong criticism of the report could leave it in a difficult position in the future if the government wants to consider another supplementary budget, something it has done every year for the past decade. "It seemed like they were trying to leave some wiggle room in that area," said Peter Morgan, economist at HSBC Securities, "so it's hard to see why they would react so strongly." |
Elson Boles
Assistant Professor
Dept. of
Sociology
Saginaw Valley State University
University Center
Saginaw MI,
48710
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