Japan has come under strong pressure from other major powers to reduce its enormous current account surplus, it was learned yesterday as 3,000 delegates gathered here for the annual meeting of the World Bank and the International Monetary Fund. The meeting begins today.
At a Saturday night dinner meeting of the finance ministers of the so-called "Big Five" - Japan, West Germany, the United States, France and Great Britain - Japanese Finance Minister Hideo Boh was told that his country's projected $9 billion current account surplus is a danger to the stability of the monetary system.
The current account tally includes trade balance figures as well as other payments and investments that involve the flow of money between countries. Japan had promised at the time of the London economic summit of major industrial nations last May to end its surplus and run instead a current account deficit of $700 million.
But the Japanese current account has been in surplus all year, and the $9 billion estimate for 1977 comes from several international organizations. Some guess it will run even higher.
There appeared to be no pressure on West Germany to reduce a much smaller current account surplus, although both Japan and West Germany have been urged by the others to expand their domestic economies to help accelerate recovery.
It is clear that the world financial leaders, faced with high unemployment, have decided to shift their emphasis away from controlling inflation and toward modestly expanding the industrial sector.
This important change, signaled first by the IMF Interim Committee on Saturday, was endorsed at an otherwise routine meeting yesterday of the Group of Ten industrial nations.
The policy turn was indicated by the careful nuances of an Interim Committee communique, and elaborated in separate statements by three key figures, British Chancellor of the Exchequer Denis Healey, newly-elected Chairman of the Interim Committee; IMF Manager Director H. J. Witteveen; and Emil van Lennep, Director General of the Organization for Economic Cooperation and Development.
Lennep said there had been general agreement that the "greater risk lay on the side of an excessively strong recovery followed by a new inflationary recession. But does this still hold?"
His own answer was that further action may be needed to assure a stronger recovery, with the caveat that inflation should not be reignited. He revealed that the OECD would have to revise down its earlier forecast of 4.0 to 4.5 per cent growth in the OECD group from mid-1977 to mid-1978.The pace in Europe alone appears to be even less promising than the average, he said.
Healey and Witteveen were even more explicit. Healey expressed "great concern" over sluggish economic prospects, and noted "a perceptible shift in emphasis" on the part of the Interim Committee participants to giving industrial expansion to the clear priority.
For his part, Witteveen said that although some progress had been made fighting inflation, recovery "is lagging behind, and there is a general feeling that there is room for some stimulation." He is expected to develop this theme in his annual address to the joint session today, a speech which may be his last to a joint session as managing director. Witteveen announced last week that he would not seek reappointment for a second five-year term beginning September 1978.
Meanwhile, the subject of possible cooperation between the IMF and central banking systems was explored by Dr. Wilfried Guth, a leading German private banker. Guth participated in the annual lecture series that memorializes former IMF Manager Director Per Jacobsson.
Guth, a member of the board of the Deutchse Bank, said he favored closer cooperation on a voluntary basis "based on enlightened self-interest between all parties concerned." But he was dublious about more formal arrangements, such as joint or parallel financing by private banking systems and the IMF.
Guth, however, called for a much enhanced role for the IMF in managing the world's monetary system. He visualized a more powerful IMF "not as a world policeman, as it cannot and should not replace national sovereignty . . . (but) rather as a world's chief adviser, or consultant, but with sufficient resources to bridge difficult adjustment periods which tend to be longer than hitherto."