Ja­panese econ­omy faces troubles: BOJ

The Pak Banker - - Front Page -


Mr Masaaki Shi­rakawa, Gover­nor of the Bank of Ja­pan ad­dress­ing at the In­ter­na­tional Coun­cil Meet­ing of the Bret­ton Woods Com­mit­tee said it is an honor to be a part of this es­teemed panel. With the hope of stim­u­lat­ing fur­ther de­bate, I would like to dis­cuss three lessons from the global fi­nan­cial cri­sis and the re­sult­ing chal­lenges they present.

First, in this glob­ally in­ter­con­nected world, noth­ing is purely re­gional any­more. A global per­spec­tive is cru­cial. When the euro area cri­sis was ini­tially brew­ing a cou­ple of years back, there was re­luc­tance from our Euro­pean col­leagues to dis­cuss it as an is­sue with global im­pli­ca­tions.

The euro area econ­omy was re­cov­er­ing and it was ar­gued that the cur­rent ac­count of the euro area as a whole was bal­anced and that in­tra-area im­bal­ances were man­age­able. It was pre­sented as a re­gion- al prob­lem with re­gional so­lu­tions. We all know now that this was not the case. The euro area cri­sis has im­pacted global growth through both trade and fi­nan­cial chan­nels, prob­a­bly in a much larger way than ini­tially expected. Re­solv­ing the euro area cri­sis has be­come a key agenda item for the G20, and the IMF is play­ing a key role to­gether with the euro area core coun­tries to­wards its res­o­lu­tion.

To give an­other ex­am­ple, when eco­nomic growth de­cel­er­ated in the ad­vanced economies last year, there was hope that the emerg­ing economies, es­pe­cially those in the Asia would pick up the slack. Asian economies pro­vided ap­prox­i­mately 40% of global growth in 2011 and their share in global ex­ports was more than 30% in 2011. This, how­ever, did not mean they were im­mune from the slow­down of the Euro­pean econ­omy. Weak­ness in Europe has im­pacted Chi­nese ex­ports, and through the re­gional sup­ply chain.

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