Japan Wants Clear G7 Message on Financial Stability
Japan wants the Group of Seven rich nations to show a clear determination to ensure financial system stability as global markets remain turbulent, Bank of Japan Governor Masaaki Shirakawa said on Thursday.
But Shirakawa sidestepped the question of whether public funds should be used to rescue cash-strapped banks, an issue that will likely come under heated debate when G7 finance leaders meet in Washington on Friday.
"I don't think injection of public funds is something that should necessarily be discussed separately, on its own," Shirakawa told reporters when asked if Japan would offer advice based on its experience of using taxpayers' money to support ailing banks in the late 1990s.
"It involves the broader issue of safety net policy," he said.
The Financial Stability Forum, comprised of central banks and finance ministries of countries with major exchanges, has drafted an options paper that includes a plan to banks and repurchase mortgages, with the possible use of taxpayer funds.
However, U.S. officials have said that option would not be central to G7 talks on a lengthy set of recommendations the FSF is set to deliver to the finance leaders on Friday.
Shirakawa said he hoped to contribute as much as possible to discussions on stabilizing financial markets and achieving sustained global economic growth at the meeting, his first as central bank governor.
Banks are becoming increasingly hesitant to lend and there are fears that tighter credit conditions could hurt the real economy, Shirakawa said.
"Global financial market turbulence ensuing from the subprime mortgage problem is continuing," although Japan's financial system remains relatively stable, he said.
Shirakawa only won parliamentary approval to head the Bank of Japan on Wednesday, just in time for him to fly to Washington for the meeting of the G7 -- the United States, Japan, Canada, Italy, Britain, France and Germany.
He had been serving as acting BOJ head since former bank chief Toshihiko Fukui retired on March 19, as a political stalemate left Japan without a permanent central bank governor for the first time in 80 years.