Japan and China agreed yesterday they will jointly respond to any funding request from the International Monetary Fund (IMF), which is looking to more than double the size of its war chest to help countries deal with the euro zone crisis.
Japanese Finance minister Jun Azumi, after meetings with Chinese vice-Premier Wang Qishan and Finance minister Xie Xuren, said the two countries were ready to support the IMF but further efforts by euro zone members were necessary.
“What we agreed on… is that European countries need to do more, although (the situation), including Greece, is headed in a good direction,” Azumi told reporters in Beijing.
“We can expect some sort of request from the IMF to those including the United States, Japan and China. We agreed that Japan and China will coordinate closely and will jointly respond to IMF.”
The IMF is seeking to raise $600 billion (S$755 billion) in new resources to help deal with the euro zone debt crisis but countries outside of the 17-country euro bloc want to see its members stump up more money before they commit additional resources to the IMF.
Azumi said the two sides did not discuss the specific size of any funding support for the IMF although a Japanese finance ministry official said Tokyo was willing to commit a “sizeable” amount.
“The idea is Japan and China will coordinate, not compete, on any IMF action,” the official said, adding that both countries were fully aware of their importance in dealing with the crisis.
China, which has been consistently reluctant to make firm financial commitments, is seen as having the financial firepower to bail out some European governments given its $3.2 trillion worth of foreign exchange reserves at hand.
Earlier in the month, Chinese Premier Wen Jiabao said the world’s No 2 economy is considering increasing its participation in the European rescue funds and is still studying how it might go about doing it, including possibly through the IMF.
“Showing China and Japan are united to support the debt crisis is good news for European markets,” said Hiroshi Miyazaki, chief economist at Shinkin Asset Management in Tokyo. “It may still take some time for the two to decide specifics as Europe hasn’t reached agreement on a solution within the region.”
China’s state-run Xinhua News Agency also quoted vice-Premier Wang as telling Azumi that China and Japan must “proactively study” local currency settlement for trade and investment and should further enhance financial coordination.
China has become Japan’s biggest export destination and top trading partner, taking over from the US. Trade between the two countries expanded 14 per cent to a record high $344.91 billion last year, boosted by a rise in Chinese exports to this neighbour, according to the Japan External Trade Organisation said.
However, the bulk of trade between the world’s second-largest and third-largest economies is currently settled in dollars, due in large part to financial regulations and market custom.
As part of efforts to promote direct exchanges of the yen and the yuan, which would lower currency risks and settlement costs, Japan hopes to eventually set up an offshore yuan settlement centre in Tokyo. Agencies
euro zone leaders to meet on Greek bailout deal
Greece’s Cabinet has approved a final set of austerity measures sought by the European Union and International Monetary Fund as a condition for a euro 130 billion (S$215 billion) rescue package, raising the chances of a deal this week to avert a chaotic default on its debt.
The approval on Saturday was largely a formality after Athens last week unveiled details of the extra budget and public sector wage cuts worth euro 325 million to euro zone partners.
Lingering doubts over whether Greece can bring its mountain of debt down to more manageable levels in coming years could still hold up the rescue package.
Some officials in the 17-nation currency union warn chances of a deal at a euro zone meeting today are little higher than 50-50.
But Austrian Finance minister Maria Fekter was more optimistic. Asked in a television interview yesterday if she thought a deal would come together at the meeting, she said: “At the moment it appears it will go exactly this way.”
A few hundred protesters gathered outside Greece’s national Parliament yesterday to protest against the austerity measures.