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Friday, Oct. 12, 2012
A commemorative 1,000 yen coin (head, left) made for the Annual Meetings of the International Monetary Fund and the World Bank Group. KYODO
IMF-WORLD BANK IN TOKYO
Nearly 50 years ago, Tokyo meetings focused on liquidity
For Tokyo, 1964 was definitely one of the biggest years.
In October, Japan's volleyball team, dubbed the "Oriental Witches," won a gold medal at the Tokyo Olympics, heating up Japanese spirits. Shinkansen bullet trains began operating that same month.
A month earlier, Tokyo hosted the Annual Meetings of the International Monetary Fund (IMF) for the first time.
In the one-week meeting in September 1964, over 2,000 delegates and their families came to Tokyo from 101 countries.
The global economic environment was then very different from what it is now. Many developing countries needed much financial support, while Japan's economy still had much room for growth.
The main issue addressed by politicians in charge of finance at the ministerial level of each country was the international liquidity of currency, according to The Japan Times articles from September 1964. Low liquidity had been the focus of controversy in the world's financial circles for several years up to that meeting.
On Aug. 10, 1964, Finance Minister Kakuei Tanaka said in a statement to the so-called Paris Club that Japan "will have to continuously count on a considerably large scale of international liquidity in the light of the fact that its foreign exchange reserve is still far short of a satisfactory high level."
To increase the liquidity, the meetings decided to increase fund quotas to meet the financial need for developing countries.
On Sept. 10, 1964, the IMF board of governors voted for a proposed increase in capital contribution quotas of member countries, according to The Japan Times articles. The resolution on the increase was offered by Pierre-Paul Schweitzer, then managing director of the IMF.
Schweitzer stressed that the IMF's resources would continue to be directed toward helping countries to overcome their payment difficulties in accordance with the fund's purpose.
"Widespread support was given to the multilateral institutional approach toward strengthening international liquidity within the framework of the fund rather than on a more restricted basis," Schweitzer was quoted as saying in The Japan Times article dated Sept. 12, 1964.
"The world cannot be clearly divided into two groups, the developing and the industrial countries. Undoubtedly, a number of industrial nations, particularly those with payments surpluses, have experienced inflationary pressure," he was quoted as saying.
The total IMF capital reached $21.377 billion after the resolution was approved. Tanaka and many of his counterparts in the world, including U.S. Secretary of the Treasury Douglas Dillon, claimed the need for an increase in the quota, while delegates from 20 Latin American countries and the Philippines opposed it.
On Sept. 8, 1964, Tanaka expressed in the annual meetings Japan's unreserved support of Schweitzer's assertion that the IMF's resources should be expanded and its functions enlarged as a concrete step to strengthen international liquidity.
Tanaka then addressed problems concerning resolutions on ways and means to enable developing countries to promote their trade and development adopted at the meeting of the U.N. Conference on Trade and Development.
He also stressed the need for closer collaboration among the nations to find the road to prosperity by strengthening and cooperating with international financial institutions.
Besides the increase in the fund quota, the IMF governors approved 11 other resolutions, including the contribution of $50 million to the International Development Association by the World Bank.
Also during the 1964 Tokyo meetings, George Woods, president of the World Bank, told Tanaka that the bank would grant Japan a $150 million loan in the following year, according to The Japan Times article. The annual interest for World Bank Loans to industrialized countries was 5.5 percent then.
Valery Giscard d'Estainig, the French minister of finance and economic affairs at the time, stated at the World Bank Board of Governors meeting that the international monetary system should be based on gold rather than the U.S. dollar and the British pound, according to The Japan Times article on Sept. 10, 1964. His remark apparently did not come true as the U.S. dollar remains the key currency worldwide.