January 23, 1999
Japan's influential vice finance minister Eisuke Sakakibara has pitted himself against the International Monetary Fund and what he calls its "market fundamentalism" and "American dominance."
Sakakibara, known as "Mr Yen" for his influence on currency markets, is putting forward the "intellectual background" to the policies followed by Finance Minister Kiichi Miyazawa.
Citing US financier George Soros, Sakakibara has criticised the role of the IMF during the crises in Asia, Russia and now Brazil. He described the philosophy of the Fund, which he called the "Washington consensus," as "free markets and sound money."
It amounts to the "blind application of the universal model on emerging economies," he said at the Foreign Correspondents' Club in Tokyo on Friday.
The handling of the Asian crisis by the world's leading nations was, at least at first, seriously at fault, he said.
"Since I was personally involved in the process and agreed, although reluctantly, in the end to what was recommended I am in no position to criticise others for what has happened," he said.
"But unlike the (IMF's) managing director Michel Camdessus I can only say that if I am confronted with similar situations in the future I will probably handle them differently."
A senior official at the Fund has told AFP there was no sign of reticence from Japan at key IMF meetings during the crisis, even though Japan has the second largest stake in the organisation.
The Fund has admitted it underestimated the severity of the crisis when it put forward its rescue programmes in Thailand, Indonesia and South Korea but insisted it was right to impose tough economic reforms.
Sakakibara said he felt closer to Jeffrey Sachs, the Harvard academic critical of the IMF, than Stanley Fischer, the Fund's deputy head.
Behind Sakakibara's attack on "market fundamentalism" there is also a defence of Japanese bureaucracy.
"The financial bubbles in Japan or Asia were not necessarily created by mistakes in macroeconomic policy alone but were natural consequences of markets where fallible market participants interacted with each other with less than perfect foresight," he said.
Will a triumphalist and totally unfettered free market survive? Sakakibara thinks not.
"First, American dominance which seemed assured for some time after the demise of socialism seems to be declining both on political and economic grounds -- partly because of the unification of Europe and partly because of potential anti-American sentiment in various parts of the world that has arisen in recent years," he said.
In the early 1990s "it may have looked as if the US would come close to having a financial empire but that is certainly not the reality we face at the end of the 20th century."
The Japanese official, who has publicly backed the foreign exchange controls which Premier Mahathir Mohamad put in place in Malaysia, insisted: "Global capitalism needs to be restrained in its cross-border transactions be it through disclosure, supervisory and prudential regulations or outright controls."
"The need for coordination is absolutely essential but coordination should remain coordination and not coercion," concluded "Mr Yen."
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