TOKYO – Japan is hoping the recent flare-up in friction with China will not damage the two Asian economic powers’ co-operation in international finance, a finance ministry official said Wednesday.
The relationship with Beijing is too important to be derailed by recent antagonisms over disputed islands in the East China Sea, said Takehiko Nakao, a vice minister for finance
Violent anti-Japanese protests erupted in China recently in one of the worst flare-ups over conflicting claims to the islands called Senkaku in Japan and Diaoyu in China. Though Chinese authorities have quelled the demonstrations, the two sides have continued to trade angry accusations. A Wall Street Journal report said representatives of several major Chinese state-run banks were cancelling plans to attend the annual meetings of the International Monetary Fund and World Bank in Tokyo next week.
“It’s really disappointing. I was really sorry to hear that,” said Nakao. But he said Japan has had no news of any cancellations by Chinese government officials. China’s government and business offices are closed this week for a national holiday.
Nakao said he hoped the problems would not spill over into the two country’s financial relationship, which has progressed toward boosting use of the Chinese and Japanese currencies instead of the U.S. dollar for international trade. The two sides also have agreed on mutual purchases of government bonds by each side.
“There has been trust and good co-operative relations … and my strong belief is that we should continue to do this,” he said.
Along with the IMF and World Bank meetings, finance ministers of the “Group of Seven” major industrial economies also will meet in Tokyo, Nakao said.
China’s slowing growth is bound to be a focus of the Tokyo meetings, along with the U.S. predicament over its “fiscal cliff” — the risk of deep spending cuts and tax increases if the U.S. Congress fails to reach a budget deal by the end of the year.
Nakao, who recently visited China, said he believed there was room for Beijing to do more to stimulate the economy, but that Chinese officials were wary of reigniting inflation and also hindered by uncertainty over upcoming changes in the top Communist Party leadership.
Japan’s own domestic political upsets, on top of its territorial tussles with both China and South Korea, are unwelcome distractions at a time when Tokyo is striving to help stabilize the global financial system and get its economic house in order.
Finance ministers meeting in Tokyo next week will be mainly focusing on broad issues such as the European debt crisis, reforms of the IMF and helping along the struggling global recovery.
While the dollar should remain the “centre” for international finance, Nakao said Tokyo favours wider use of local currencies to help reduce risks and prevent problems at times of crisis when the dollar — which tends to be used as a safe haven currency — is in short supply.
Though it will host next week’s meetings, Japan has little influence over their agenda. Its ability to shape policy also may be hampered by frequent changes in leadership. This week, Prime Minister Yoshihiko Noda named a new finance minister, Koriki Jojima, in his third cabinet reshuffle since he took office 13 months ago.
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