IMF agrees to watch impact of Japan's crisis on global economy

WASHINGTON, April 16 Kyodo - The policy-setting body of the International Monetary Fund agreed Saturday to watch the developments of Japan's economy struck by the catastrophic March 11 earthquake and the nuclear crisis.
At a biannual meeting of the International Monetary and Financial Committee, the policy board also assured that the Washington-based entity will extend its assistance to the country, which is struggling to reconstruct its quake-hit northeastern area.
The economic impact of the tragedies in Japan on the world economy ''warrants close attention,'' the IMFC said in a statement after the gathering.
''We extend our sympathy and support to the government and people of Japan as they grapple with the impact of the recent natural disasters,'' it added.
The words came after the Group of 20 financial chiefs, who wrapped up their two-day meeting in Washington on Friday, warned that Japan's economic downturn is a downside risk to the global economy, underscoring their concern over the aftermath of the country's nuclear disaster.
Japan's economy is now under strong downward pressure as the disasters have dealt a heavy blow to the nation's manufacturing activities and caused supply disruptions across the board, which are feared to affect its major trading partners including the United States and China.
At the IMFC meeting, Japanese Finance Minister Yoshihiko Noda acknowledged that the nation's current situations ''are creating uncertainty regarding global economic prospects.''
While he did not clearly explain about how Tokyo will carry out reconstruction work in the country's disaster-hit areas, Noda noted Japan will ''complete the reconstruction process and build a country that is stronger than before.''
''Given the expected increase in investments necessary for post-disaster reconstruction, the (Japanese) economy will likely rebound as the reconstruction process moves into full swing,'' Noda said.
With radiation spreading from the crippled Fukushima Daiichi nuclear power plant, he tried to prevent unsubstantiated rumors about radioactive contamination from marring Japan's trade with other countries.
As Japan will continue to provide transparent information on the nuclear matter, ''I would like to ask all countries to undertake level-headed responses that are firmly grounded in scientific facts,'' he said.
Noda also reiterated his policy of maintaining Japan's fiscal discipline amid expectations the country will be forced to newly issue massive government bonds to finance reconstruction measures.
The necessary amount of funds for the recovery work will not be small, but ''achieving fiscal consolidation in the medium term will continue to be one of Japan's most critical tasks,'' he said.
Barring a range of problems stemming from the crisis at the Fukushima nuclear power plant, the government has estimated that the damage from the quake and ensuing tsunami that left around 28,000 people dead or missing could amount to 16 trillion to 25 trillion yen.
At the meeting of the IMFC, which was set up in 1999, participants from 24 member nations also discussed issues such as the composition of the special drawing rights, a quasi-currency the IMF uses as its unit of account.
While policy board members of the committee did not single out fast-growing China, they said they ''call for further work on a criteria-based path to broaden the composition of the SDR basket.''
The SDR is now composed of the dollar, euro, yen and pound.
Meanwhile, the joint IMF-World Bank Development Committee will meet later Saturday to discuss recent commodity price hikes worldwide, which could hamper economic recovery across the globe.
World Bank President Robert Zoellick said Thursday that global food prices have soared 36 percent from a year ago and they are now in ''a danger zone.''