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Japan wants to put global imbalances on the map
Japan wants to highlight global imbalances as key topics of debate, and take steps to fix them, when it chairs next year’s gatherings of the Group of 20 major economies, government officials said this week.
Tokyo hopes other countries would join Japan to counter US President Donald Trump’s focus on narrowing US trade deficits through purely bilateral trade deals, the officials say, rather than the big international agreements now in place.
The annual International Monetary Fund and World Bank meetings have been held on the Indonesian resort island of Bali this week.
Japan’s agenda-setting plan also underscores Tokyo’s view that instead of focusing too much on bilateral trade imbalances, there should be more emphasis on overall capital flows and structural factors behind the US current account deficit – such as a lack of domestic savings.
Japanese Finance Minister Taro Aso said he made the case to his G20 colleagues at a dinner meeting on Thursday.
“I’ve told my counterparts that excessive global imbalances are risks to the global economy... and that it’s important to discuss this at next year’s G20 meetings,” Aso told reporters.
Trump’s “America First” policies and escalating Sino-Chinese trade frictions have overshadowed the weekend gathering of G20 finance leaders, many of whom expressed concerns over the harm to global growth from trade conflicts.
The G20 finance leaders failed to bridge differences on trade with this year’s chair, Argentine Treasury Minister Nicolas Dujovne, conceding that the G20 can only provide a platform for countries to solve disputes among themselves.
Japan, which takes over from Argentina as G20 chair next year, sees brighter prospects for the forum.
“The G20 isn’t a forum to solve bilateral trade disputes...but it’s the best forum for debate if you see trade frictions as part of a bigger problem of glo- bal imbalances,” said a senior Japanese government official directly involved in G20 negotiations.
Global imbalances had once been a key topic of debate at G20 gatherings with a focus on each country’s current account balance, or the overall flow of money that included, but was not confined, to trade.
This approach runs counter to Trump’s focus on narrowing the US trade deficit via import tariffs and bilateral deals.
Japan has long favoured a multilateral approach on trade over bilateral deals, which would put it under direct US pressure to open up sensitive markets like agriculture.
Tokyo is also wary of having its hands tied on keeping sharp yen rises in check.
A strong yen is seen as hurting Japan’s economy by making its exports less competitive overseas.
US Treasury Secretary Steven Mnuchin said yesterday Washington would like to include a provision to deter currency manipulation in fu- ture trade deals, including with Japan.
Japanese policymakers concede that convincing the Trump administration to shift its emphasis away from bilateral US trade deficits and to focus on structural policies could be difficult.
“It may be a hard sell,” the official said. “But we can’t give up.”