Japan seeks greater transparency about the banking issue in Europe
Pierre Leblanc and Lee Jay Walker
Modern Tokyo Times
The government of Japan continues to be more outspoken under Prime Minister Yoshihiko Noda when it comes to international relations, geopolitics, and economic issues. Therefore, the Finance Minister Jun Azumi once more urged leaders in Europe to be transparent about the banking sector. This was in relation to the sovereign debt crisis and other issues connected with the ongoing financial situation.
After a working dinner for finance ministers from the Group of 20 the Japanese representative spoke frankly to reporters. Azumi commented that “If Europe needs worldwide support, even after doing what it can in addition to revealing sufficient information (about banks), then it might lead us (Japan) to consider.”
It is clear that Azumi is offering support to the European Union providing certain conditions are met which will enable Japan to increase its financial holdings in Europe. Capital injection and stability is needed in order to calm markets but for the last few months it is clear that every step forward was met with another step backward.
More alarming, the banking crisis in Europe appears to be spreading and nations like Greece are in crisis. Japan, despite its own debt issue is still a nation with huge reserves and with massive financial holdings. Therefore, in recent months the government of Japan appears to be stepping up its priorities and this especially applies since Noda took office.
However, it is a continuation of the past leader of Japan, Naoto Kan, who was equally worried. Therefore, earlier in the year Japan stepped in and bought more Eurobonds but the March 11 earthquake, tsunami and nuclear crisis, meant that more urgent issues were needed to be met at home.
Recently, despite the high yen, it appears that the government of Japan is feeling more confident and Noda is clearly concerned about internal debt issues in Japan and the international financial malaise which is ongoing.
Masaaki Shirakawa, the Governor of the Bank of Japan, also weighed in and made it clear that Japan had great experience in this area because of serious problems in the late 1990s. Shirakawa stated that “It is necessary to correctly determine assets of financial institutions and have them raise capital by themselves if they run short of it…If (the institutions) still need more capital, then it requires capital injection.”
The approach from Japan is that Europe must try to grasp the situation and galvanize the financial sector by internal mechanisms. However, providing these internal mechanisms are based on a sound footing then Japan will purchase rescue bonds which will help the Eurozone.
Under Kan Japan stepped in by buying bonds to help Ireland and Portugal in January and June. This financial support by the Kan government was considerable because the total purchase of European Financial Stability Facility bonds accounted for approximately 20 per cent. Therefore, the Democratic Party of Japan is clearly concerned about events in Europe and the new leader Noda is determined to provide support after internal mechanisms are installed by European leaders.
In a past article by the Modern Tokyo Times it was stated that “Japan also knows that the European market and American market are very important for Japanese companies and it appears that the government is thinking about the long-term. Therefore, providing a feasible plan is put on the table the government of Japan will help Greece which is in dire straits at the moment.”
“Japan’s economic system is far from perfect but it somehow keeps on ticking and the reserves of the nation are a blessing. However, while America sits on its feet and does little to ease global pressure, the government of Japan is willing to help the European Union providing plans have a firm foundation.”
Azumi also commented about this issue the week before and stated that “If there is a scheme that is based on a firm process, involves a reasonable amount of money and could provide the world and markets with a sense of security regarding a Greek bailout, I would not rule out the possibility of Japan sharing some of the burden.”
Japan is letting it be known that support will be forthcoming and that the political leadership is fully aware about the seriousness of the crisis.