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Correction to This Article
This op-ed incorrectly quoted Japanese Prime Minister Taro Aso on how much Japan is prepared to lend to the International Monetary Fund. Aso said Japan could lend as much as $100 billion.

Japan's Summit Hopes

Prime Minister Taro Aso On an Economic Rescue

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Saturday, November 15, 2008; Page A19

Japanese Prime Minister Taro Aso, who leads the world's second-largest national economy, spoke with editorial page editor Fred Hiatt and reporter Anthony Faiola yesterday ahead of his planned attendance at today's G-20 meeting. Excerpts:

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Aso: First, I'd like to say that there seem to be many people nowadays talking about what should come after Bretton Woods or after the dollar key-currency regime, but I do not think this is realistic. . . . We must continue to support the dollar regime for some time.

I'd also point out . . . that, with regard to the IMF, it does not have adequate resources and . . . therefore we feel there's a need to increase the capital resource of the fund.

Japan is prepared to provide, in the form of loans, up to, say, a maximum of $100 million to the IMF.

Oil-producing countries, China, perhaps some other countries that have ample foreign currency reserves could also contribute.

Q. It's said that China is unlikely to [contribute] unless its clout in the IMF is increased. Would you favor that?

Well, I think it is true that the Asian voice is somewhat limited at the IMF and other international institutions. The economic clout of emerging economies is far different today than when the Bretton Woods system was established, in 1944, or when the United Nations was established. So not just the Chinese, but it is quite understandable that other Asian countries also would express that sort of view. . . .

How quickly would you like to see China have greater voting rights in the IMF?

I don't think that is something that should be achieved today or tomorrow. I believe that needs to be worked out in time through the IMF annual meetings, because if we try to achieve that in haste, it will only cause some frictions within the IMF.

Do you think the administration is making a mistake by only injecting capital into banks and not buying troubled assets?

There are certain things that Japan did back in '97 and '98 that are not properly understood outside our country. The first thing was to properly and fairly value the troubled assets that were held by the banks in the form of real estate, and remove these troubled assets from their balance sheets.

Second we discovered that market policy alone would not enable us to get over the crisis. You see, bank lending rates would approach infinitely close to zero, and yet business corporations did not borrow from banks. . . . Banks found a huge glut of money on hand for which there was no one to borrow, so the balance sheets of banks continued to weaken, which led Japan into deflation. If the situation had been left unattended, doubtless Japan would have fallen into something akin to the Great Depression. So, at that point, the government went ahead with the mobilization of public funds.


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