TOKYO (MNI) – International Monetary Fund Managing Director
Christine Lagarde on Saturday warned that a worsening of the European
debt crisis would hit Asia through trade and financial markets.

Lagarde also told a news conference that the current resources of
the fund are “adequate at the moment” but added that she could rely on
major IMF members, “particularly Japan, the second largest shareholder,
to be up to the task if the task were to increase the resources of the
IMF.”

She declined comment on whether she asked Finance Minister Jun
Azumi to increase Japan’s bilateral loans to the IMF, saying, “If I had
asked, I wouldn’t tell you because it would be for him to say so.”

During her meeting with Azumi on Saturday, Lagarde said they
“briefly” discussed Japan’s recent currency intervention in a bid to
stop the yen’s rise from hurting the export-led recovery.

“We (the IMF) take the view that concerted action is the most
efficient way of intervening,” she said.

“We are aware of the fact that the Japanese intervention was done
with the view to avoid disorder and excessive volatility on the markets,
and that’s very much in the spirit of communiques and statements by the
G7 on such matters.”

Lagarde declined specific comment on short-term fluctuations of
currencies, whether they are appreciation or depreciation.

The IMF’s Special Drawing Rights is “one of the many ways in which
the fund can mobilize resources… and one of the avenues that could be
considered,” she said.

“But I wouldn’t exclusively focus on Special Drawing Rights,” she
added.

“I think that there are other ways to increase resources and
dedicate those resources not only to members of the eurozone, which are
the epicenter of the crisis at the moment, but to also other members of
the IMF because there are emerging markets, low-income countries,
middle-income countries that could be what they call bystanders of the
crisis and who might need help as swell.”

Lagarde stressed that the IMF’s resources are “adequate at the
moment” but that if the European debt crisis were to develop further,
“then we would have to rethink this issue.”

On efforts by eurozone countries to reduce public debt and reform
social structures, she said, “political clarity and credibility are much
needed in Italy.”

She also urged Rome to steadily implement economic reform programs
approved by Italian parliament.

“Austerity measures decided by Greece are necessary for its own
economy, but it’s also a factor of sharing the burden of what needs to
be done within the currency zone,” she said.

In a statement issued at the new conference, the IMF chief said she
shared the view with Japanese policymakers she met this week that
Japan’s economic recovery from the March earthquake disaster will
“continue next year, supported by reconstruction spending.”

But she also said “Japan, like the rest of the world, will face
challenges given the difficult situation in Europe.”

She said she told Azumi that “Japan is no more immune (to the
crisis) than other countries.”

Lagarde renewed the IMF’s call on Tokyo to adopt a “strong
medium-term plan to reduce public debt” and the Bank of Japan to
“maintain accommodative monetary policy.”

In order to achieve sustained economic growth, Japan needs to
liberalize trade further and raise the labor force participation by the
elderly, young and women, she said.

On her first official visit to Japan as the IMF chief, Lagarde also
met BOJ Governor Masaaki Shirakawa on Friday.

tokyo@marketnews.com
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