Press Conference by Shoichi Nakagawa, Minister of Finance and Minister for Financial Services
February 13, 2009
[Opening Remarks by Minister Nakagawa]
There is nothing particular to report about today’s cabinet meeting.
[Questions and Answers]
I would like to ask you again about the G-7 meeting. I expect that it will focus on the recognition of the current state of the real economy and how to prevent the bottom from falling out of the economy. First, I would like to know what kind of agreement or cooperation you will aim for. Also, what do you think of restrictions on pay for top executives of financial institutions and rules concerning the ethics of financial institutions, which will reportedly be on the agenda?
Later today, I will go to Rome, where we will probably take up the same issues that were discussed in a telephone conference of the G-7 Finance Ministers that was hosted by Mr. Geithner (U.S. Treasury Secretary). I suppose that the main point will be that G-7 will do what it should in the run-up to the G-20 meeting (Summit on Financial Markets and the World Economy), which is scheduled for April 2. Specifically, we will probably receive explanations about the U.S. financial rescue plan that was recently announced, and then there will probably be explanations about the U.S. Financial Stability Plan, a plan for the purchase of securities, including ABS (asset-backed securities), ethics and restrictions on income. In the recent telephone conference, Mme Lagarde (French Minister for the Economy, Industry and Employment) expressed hopes to put the “buy American” provision, or protectionism, on the agenda and everyone agreed to this, so there will be discussion on how to deal with protectionism, which is probably the opposite of international cooperation, and Japan intends to make some concrete proposals, including proposals on matters such as this one. As a result, it will be probably confirmed that a positive course of action should be taken leading up to the G-20 summit on April 2 and that international cooperation should be conducted properly, that protectionism should be avoided and that each country should do all it can domestically based on an exchange of opinions regarding recognition of the current situation and measures to be taken by individual countries.
I have a related question. Yesterday, (former Prime Minister) Mr. Koizumi talked not only about postal reform but also about fixed-sum stipends in relation to a bill concerning budgetary funds. He made remarks to the effect that he did not believe this bill was worth being enacted by means of a two-thirds majority. I think that his remarks indicate that he may not vote in favor of the bill in a second vote expected to be held within several days, in which it is expected to be enacted by means of the two-thirds majority. How do you feel about this?
I understand that he used to support this bill. I find it difficult to understand that a person who once served as Prime Minister would oppose what he once supported and what was decided by the party. It would have been a different story if he had previously voted against it or abstained. It is difficult to understand that a person who served as president (of the Liberal Democratic Party) would now make such remarks about something that was decided through intra-party procedures and procedures in the House of Representatives with the support of lawmakers, including him.
I understand that you talked with the Prime Minister and the Chief Cabinet Secretary after the cabinet meeting. Could you tell us, if possible, about what you discussed with them?
As I am leaving for the G-7 meeting later today, we discussed some matters related to this.
You said that Japan will make concrete proposals. Could you tell us about the proposals if possible?
After discussing them at the meeting, there will probably be an opportunity for a press conference like this one.
I have another question concerning the G-7 meeting. I expect that protectionism will be a keyword, and as Japan earns its income from the production and export of goods, the rising protectionism in some counties is not favorable for Japan. Leaving aside specifically what Japan will say, from what standpoint does the country intend to take the initiative or lead the debate at the G-7 meeting?
Although there is no doubt that Japan earns its income from exports, its income is also affected by imports, such as the import of energy and food. This means that there are two sides to a strong yen. Imports become cheaper, while exports, which earn foreign currencies, are hurt. I would like to distinguish between this matter and protectionism, which I think is not good. As a result of the sudden enactment of the Smoot-Hawley Act in the United States at the time of the Great Depression, protective tariffs were raised around the world, leading to the division of the world into several economic blocs. Although protectionism may bring benefits to the countries adopting it, the overall impact is certain to be negative. But there may be something of a fallacy of composition in this. Consequently, the United States and some European countries are engaging in protectionism, and Russia, which is not a member of the WTO (World Trade Organization), as well as India, is engaging in it. I think that it is absolutely inappropriate that the United State and Europe, which previously urged Japan to carry out liberalization, as well as other countries, employ practices that are problematic under WTO rules and engage in protectionism now that the situation has become like this, and I think we must stop this by all means. All countries, whether they are in the WTO or in the G-7, have been saying all along and will continue to say that protectionism is not good. However, if countries engage in protectionism regardless of what they say, I believe that Japan should take resolute actions.
The G-7 meeting will be held at a time when Japan’s real economy has deteriorated considerably, with export industries leading the way down, and its trade deficit has expanded compared with the condition at the time of the previous G-7 meeting and the (G-20) financial summit, and I suppose that one factor behind this situation is the yen’s appreciation. Is it possible that foreign exchange will be discussed at the forthcoming G-7 meeting?
I think that the greatest cause of the decrease in exports — although imports also declined — is the deterioration of the global economy. Of course, it is true that the terms of foreign trade, including foreign exchange rates, have become somewhat unfavorable. However, the greatest cause is the evaporation of export markets, including China, the United States and Europe. So I believe that while it is important to put the global economy on the path to recovery, we should quickly create a domestic economic engine in Japan. Consequently, although foreign exchange is of course an important issue, I do not know how much it will be discussed at the G-7 meeting nor do I intend to bring it up. As we have always communicated our basic stance to the United States and Europe of preventing rapid movements in foreign exchange rates, we will explain it if they ask us.
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