Treasury Secretary Summers on G-7 Ministers'
Text: Treasury Secretary Summers on G-7 Ministers'
(G-7 will monitor yen while Japan continues stimulus) (1480)
Secretary of Treasury Lawrence Summers said the top finance officials of the Group of Seven (G-7) major industrialized countries agreed to monitor the rise of the Japanese yen and take action "as appropriate" while Japan moves to make its fragile economic recovery more sustainable.
In a statement released after the September 25 meeting of the G-7 finance ministers and central bank governors in Washington, Summers noted that the G-7 objective of balanced and sustainable growth among the major economies requires that Japan act to sustain its upturn. Japan has achieved two quarters of expansion after a severe contraction last year.
The sharp rise in the value of the Japanese yen in recent months and its potential impact on the Japanese and world economies, however, have raised considerable concerns. Summers cited the paragraph from the G-7 meeting's communique welcoming "indications by Japanese authorities that policies would be conducted in view of this potential impact." The communique pledges that the G-7 governments will "continue to monitor developments in exchange markets and cooperate as appropriate," he said. In later questions, he declined to elaborate on what kind of cooperation would be used.
Summers also quoted the communique statement that Japanese authorities agreed to "implement stimulus measures until domestic-demand-led growth is solidly in place and, in the context of their zero interest rate policy, to provide ample liquidity until deflationary concerns are dispelled."
The G-7 financial officials regularly meet the weekend before the spring and fall International Monetary Fund (IMF)/World Bank meetings. The current IMF/World Bank meetings will be held September 28-30 although regular pre-meeting events have been going on for almost a week.
The G-7 members are Canada, France, Germany, Japan, Italy, the United Kingdom and the United States.
In his statement, Summers also said the G-7 ministers and central bankers met with Russian authorities and urged them "to set up economic reforms and combat the critical problems of corruption and money laundering -- in which a key step will be the earliest possible passage of a strong money-laundering law."
The G-7 ministers agreed that financing for Russia "should depend on compliance with stronger safeguards on the use of fiscal resources and improved internal controls," he said. The communique contains a significant section on steps being taken around the world to attack corruption and money laundering, Summers noted.
He also cited G-7 agreement to move forward on the Cologne Initiative to expand the IMF/World Bank administered Heavily Indebted Poor Countries (HIPC) debt relief program. The G-7 agreed that crucial to the new initiative will be a "new coordinated approach by the World Bank and the IMF to the poorest countries," he said.
The G-7 also endorsed the creation of a new mechanism, tentatively called the G20, where representatives of the major industrial and emerging market economies will meet to work on ways to improve the global financial architecture. This new group, which will be chaired by Canadian Finance Minister Paul Martin, will hold its first meeting in Berlin in December. Specific areas of concern will include reducing national vulnerability, increasing coordination between the IMF and the World Bank and developing better ways to deal with crisis resolution, Summers said.
Following are initials used in the text:
FATF -- Financial Action Task Force.
OECD -- Organization for Economic Cooperation and Development.
Following is the text of Summers' statement as released to the press:
September 25, 1999 Statement by Treasury Secretary Lawrence H. Summers At The Post-G7 Press Conference
Let me begin by saying a few words about today's meeting, and then I will be happy to answer questions.
Our discussion today focused on five central topics.
First: Achieving Balanced and Sustainable Growth in the Global Economy
-- In our discussions of the global economy, we recognized that it is important not to take recent improvements in the global outlook for granted and that there remain serious challenges ahead.
-- In this context, Japan was a key focus of discussion. There is a paragraph in the communique on Japan that you will want to read carefully. It includes a statement that: "the Japanese authorities reiterated their intention to implement stimulus measures until domestic-demand-led growth is solidly in place and, in the context of their zero interest rate policy, to provide ample liquidity until deflationary concerns are dispelled."
-- On exchange rates, let me also repeat what we have said in the communique: "we shared Japan's concern about the potential impact of the yen's appreciation for the Japanese economy and the world economy. We welcomed indications by the Japanese authorities that policies would be conducted appropriately in view of this potential impact. We will continue to monitor developments in exchange markets and cooperate as appropriate."
Second: Recovery in Emerging Market Economies
-- We welcomed the return of more stable conditions in many countries, while stressing the importance of continued commitment to economic and structural reform.
Third: Debt Reduction and Poverty Reduction
-- We have reached important conclusions which we hope will make agreement possible this weekend on the financing of the Cologne initiative for the Highly Indebted Poor Countries -- relying primarily on the resources of the international financial institutions themselves.
-- Just as importantly, we all agreed that central to this initiative will be a new coordinated approach by the World Bank and IMF to the poorest countries. We called for a new strategy to boost growth and reduce poverty, with greater transparency and broader public participation to improve ownership of national policies and programs. These should provide for clear, measurable improvements in the quality of life in the poorest countries.
-- I look forward to the first joint meeting of the Interim Committee and Development Committees tomorrow to take up this vital issue, and am particularly glad that the Enhanced Structural Adjustment Facility (ESAF) will end, after the announcement tomorrow by the Managing Director of the IMF of a new Poverty Reduction and Growth facility.
Fourth: Reform of the Global Financial Architecture
-- We have now launched the new G-20 mechanism for dialogue among key industrial and emerging market economies -- with the first meeting expected in December.
-- We discussed critical priorities for the future. Much has already been done to build a stronger global financial system -- based on more robust national policies to avoid crisis as well as a better international capacity to respond when crisis occurs. But we shared a collective sense of impatience to do all that we can in the coming year to implement further concrete steps in the following three areas:
-- Reducing national vulnerability to crisis with better management of their external balance sheets to avoid a buildup of unstable debt and, perhaps most critically, efforts to promote sustainable exchange rate regimes in emerging market economies.
-- Pressing further with coordination between the IMF and the World Bank on the crucial areas relating to financial stability and successful development -- with shared work and emphasis on strengthening the critical infrastructure for countries' financial systems, ranging from banking supervision, corporate governance, and bankruptcy regimes to the social agenda.
-- On the crucial issue of crisis resolution, we reaffirmed the framework of principles and tools that we endorsed in our Report to Heads in June, noting the need to maintain flexibility to address diverse cases effectively. Going forward, we stressed the importance of supporting a stable flow of capital to emerging markets, that reflected market judgements of countries' economic and financial prospects.
We have learned again recently the crucial importance of rooting out corruption that can undermine countries' economic health and wellbeing, and addressing financial crime, including through measures to address the risks posed by offshore centers in a number of areas, including money laundering,
-- We called on the IMF and World Bank to perform authoritative reviews of ways to strengthen safeguards on the use of their funds.
-- We also welcomed the recent work by the FATF and the OECD to address the rising concern about illicit international financial transactions, including money laundering, and broad-scale tax evasion.
-- Let me add in this context that the United States will be pursuing money-laundering issue at a domestic and international level with the implementation of our first comprehensive national money laundering strategy announced earlier this week.
Finally, we met with our Russian colleagues.
-- We urged the Russian authorities to step up economic reforms and combat the critical problems of corruption and money laundering -- in which a key step will be the earliest possible passage of a strong money-laundering law. We welcomed their commitment to this.
-- In this context, we also agreed that IMF financing for Russia should depend on compliance with stronger: safeguards on the use of fiscal resources and improved internal controls.
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