November 1, 1998
Tokyo,-- Japan will propose to the other Group of Seven (G7) economic powers the creation of an international financial
supervisory body to stop speculators disrupting markets, a report said
Sunday.
Japan's draft proposal says the body could be founded by integrating the supervisory divisions of the International Monetary Fund, the World Bank and the Bank for International Settlements, the Nihon Keizai Shimbun said. The newspaper said Tokyo would make the proposal at a meeting of the G7 deputy finance ministers and central bank governors expected this month, with the aim of having it agreed at a G7 summit in Germany next June.
In a joint statement issued last week the seven heads of government called for a new framework for the next century to stabilise the world's increasingly interlinked economies. The G7 groups Britain, Canada, France, Germany, Italy, Japan and the United States. Japan says the organisation would promote information exchanges and technical cooperation among countries' financial authorities, monitor cross-border investors and collect data on capital flows, the paper said.
The body would require hedge funds to disclose information if they disrupt markets while tightening regulation on financial institutions putting up money for such funds as well as invitations for investment in them, it said.
As for the IMF reform, Japan will propose the IMF set up a new lending scheme to provide liquidity quickly to countries in trouble and be able to raise funds in markets for prompt loans, the paper said. The G7 statement last week backed the creation of a special facility within the Fund to provide emergency credits to countries that are not in crisis but are nonetheless threatened by devaluation and economic weakness elsewhere. The Nihon Keizai added Japan called for the creation of regional funds in such blocks as Asia and Europe to complement the Washington-based IMF.
Japan will also propose integrating debt guarantee functions at World Bank institutions under the Multilateral Investment Guarantee Agency to back bonds issued by developing countries, the paper said.
Japan also wants to limit the IMF's involvement in reforming structural problems of troubled countries as the Fund's stringent fiscal policies caused some social unrest in Asia, it said.
Japan says the IMF should recognise the diversity of individual countries' history, culture and stage of economic development and avoid hurting confidence by demanding a sweeping, drastic reform, it said. The proposal is expected to be a starting point for international discussions to reform the IMF-led postwar monetary system to better cope with the new environment such as fast cross-border flows of money, it said.
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