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Sunday, Oct. 14, 2012
Tax hike lauded as IMF meet ends
Annual gathering upbeat despite 'negative loops' and key downside risks
By JUN HONGO
Effective programs for fiscal sustainability and structural reform, including Japan's recent consumption tax hike, will be crucial to jump-start global growth amid continued uncertainty, the International Monetary and Financial Committee said Saturday.
"Global growth has decelerated and substantial uncertainties and downside risks remain," the IMFC said in a communique released after its meeting in Tokyo.
The IMF's policy-setting body, made up of two dozen central bankers and government ministers, urged member states to "act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth."
But while IMFC Chairman Tharman Shanmugaratnam said countries must work on mid- and long-term policies that address these issues, he also said the future looks bright.
"IMFC members all agree that we are in a better position today than we were six months ago in regards to getting growth restarted," Shanmugaratnam said.
Governments should focus on implementing the "right type" of tax measures and spending to address such issues, he added.
Speaking at the same news conference, IMF Managing Director Christine Lagarde also pointed to positive developments.
While "you can't eliminate uncertainty," Lagarde said, the discussions at the IMFC meeting and other gatherings "narrowed down the degree."
Collective action will be crucial in tackling global economic challenges, she added.
The IMFC meet was one of the last major events held at this week's annual gatherings of the International Monetary Fund and the World Bank in Tokyo. In a statement released after the meeting, the committee said significant progress has been made to address the eurozone's sovereign debt crisis, including the European Central Bank's launch of the Outright Monetary Transactions initiative.
"But further steps are necessary," including the implementation of effective banking and measures that boost growth and employment, the IMFC noted.
On Japan, the committee said it is crucial that the nation make further progress in managing its massive fiscal debt in the medium term and also secure funding for this year's budget.
Lagarde, meanwhile, said the scheduled consumption tax hike that was legislated earlier this year marks "a very significant step toward fiscal consolidation."
During the IMFC meeting, Finance Minister Koriki Jojima stated that Japan "expects to achieve the goal of halving the ratio of the primary budget deficits of the central and local governments to gross domestic product by fiscal 2015."
On Japan's economic outlook, Jojima explained that 2 percent growth is possible in fiscal 2012 if "downside risks subside."
He also touched on Japan's new $60 billion line of credit to bolster the IMF's resources, adding the country is also ready to contribute to the organization in terms of human resources.Later in the day, Jojima told a news conference that the progress made during the annual meetings was "significant," adding Japan will now focus on implementing further fiscal consolidation measures, as instructed by the IMFC.
"We will take the advice seriously and work" to reduce the government's mountain of debt, he said.
Jojima also claimed the absence of China's leading policymakers from the meetings didn't have much impact on the outcome, although he conceded that "it would obviously have been better if senior Chinese officials had attended."
A finance ministry official added that "there weren't any opportunities to exchange opinions with China bilaterally, as would have happened under normal circumstances."
Later in the day, the World Bank's Development Committee also released a communique after holding a meeting, saying it recognizes "the measures taken by many member countries to support growth, while acknowledging the need for continued fiscal, financial and structural reforms."
"We still live in a world that has more than 1 billion people living in absolute poverty," World Bank President Jim Yong Kim said after the committee's meeting. "The key is to invest (long-term) in developing countries."
East Asia unity said key
Finance ministers of East Asia Summit member states agreed Saturday to work in unison to combat risks stemming from the eurozone's debt crisis and to sustain Asia's role as "the source of global economic recovery."
"We were able to exchange views on the status of the Asian economy," Finance Minister Koriki Jojima said.
Member states also were in agreement over the risks facing the global economy, and said that working collectively as a region is crucial to stabilizing it, a Finance Ministry official said.