By Brai Odion-Esene

WASHINGTON (MNI) – Although the Japanese economy seems to have
gradually overcome the difficult situations brought about by the global
recession, the persistently high unemployment rate means the situation
remains tough, Finance Minister Naoto Kan said Saturday.

“Under these circumstances, for the time being, we need to maintain
the economic stimulus measures to ensure recovery,” he said in a
statement to the International Monetary and Finance Committee.

Kan warned that although the global economy is showing some signs
of recovery, there still seem to be risks that could disrupt the world
economy and financial markets, such as high unemployment and increasing
fiscal deficits in developed countries, as well as a surge of capital
inflows to emerging market countries.

“Thus, we should remain cautious about future prospects,” he said.

Japan, Kan said, will formulate specific medium- to long-term
measures designed to help the Japanese economy dig itself out of what he
called “a 20-year sluggish growth” and enable it to achieve sustainable
and steady growth.

Japan’s public debt is predicted by the OECD to rise to 197% of GDP
next year, and the world’s second largest economy already has measures
in the works to address its massive debt burden, Kan said.

“In June, we will design a “New Growth Strategy” for the Japanese
economy, through the year 2020, aimed at attaining a self-reliant
recovery by means of creating industries and jobs in new fields, such as
the environment, energy, medical services and nursing care.”

In addition, he said “we will present a medium-to-long-term path
for fiscal consolidation by formulating a ‘medium-term fiscal framework’
that will set the framework for expenditures for the next three years,
as well as a ‘fiscal management strategy’ that will define goals, both
in terms of fiscal deficit and debt outstanding, so as to secure market
confidence in fiscal sustainability.”

On the subject of preventing a future financial crisis, Kan argued
that in order for the IMF to effectively stabilize the financial system
of each member country, its surveillance functions as a pivotal tool for
crisis prevention must be strengthened.

“In that regard, we need to provide the Fund with the necessary
mandate and review the relevant obligations of member countries,” he
said, so the IMF can conduct multilateral surveillance, focusing on the
spillover effects of each countrys macro-economic policies and the
situation of financial systems on other countries.

He also called for a reform of the IMFs lending role, because the
IMF needs to pursue crisis-prevention facilities that can provide large
amounts of funding in a more flexible and prompt manner.

“In addition, it is important for the Fund to consider what role it
can play in providing multilateral liquidity,” Kan said.

** Market News International Washington Bureau: 202-371-2121 **

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