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2008年10月12日 (日)


(Oct. 12, 2008) The Yomiuri Shimbun

G-7 action plan must be carried out swiftly

G7 「行動計画」を迅速に実行せよ(1012日付・読売社説)

After their meeting held in Washington, Group of Seven finance ministers and central bank governors expressed determination to mobilize all possible policy measures to overcome the global financial crisis.

It is important for them to formulate concrete measures to tackle the crisis in the world's financial system that was triggered by the U.S. subprime problem and implement them as soon as possible.


The G-7 financial chiefs decided on a five-point action plan, including boosting financial institutions' capital through injections of public funds.


The action plan was a departure from conventional joint statements in that it focused on measures to combat the financial crisis that the G-7 will undertake as matters of urgency. It was unusual for the G-7 to take such a step.


The action plan indicates the rich nations' recognition of the severity of the present circumstances, pointing out that "the current situation calls for urgent and exceptional action."


The financial crisis spilled over from the United States into the rest of the world, pushing stock markets into free fall. Under the current situation, in which the world is on the brink of a depression, it was necessary for the G-7 to send to the world a strong message in an attempt to prevent the crisis from deteriorating.



Use of public funds crucial

Especially notable in the action plan is that it clearly stipulates that the G-7 will "ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources."


The use of public funds not only for purchasing bad assets of financial institutions, but also for recapitalizing them is considered crucial for overcoming the crisis.


Immediately before the G-7 meeting, U.S. President George W. Bush announced that the U.S. government may inject public funds into financial institutions to recapitalize them based on the recently established Emergency Economic Stabilization Act.


The world had been waiting for this pledge.

In the wake of the U.S. decision, the G-7 confirmed its commitment to inject public funds into financial institutions.


U.S. Treasury Secretary Henry Paulson said at a press conference after the G-7 meeting that the U.S. government will purchase nonvoting preferred stocks of financial institutions with public funds.


However, there are still many unclear points in the Treasury Department plan, such as how much stock it will purchase and when it will do so, as well as which financial institutions it will target. The U.S. government should work on compiling necessary measures and carry them out as soon as possible.


In Europe, meanwhile, it is reported that Germany will follow Britain's cue and inject public funds into its banks.


Japan, too, should enable the government to inject public funds into regional financial institutions suffering a management crisis, by resurrecting the Financial Function Strengthening Law, which expired in March.



Markets final arbiters of plan

The action plan says the G-7 will "take decisive action...to support systemically important financial institutions and prevent their failure." It also pledges support for financial institutions having difficulty in raising capital in the market in addition to utilization of fiscal and financial policies designed to tackle economic slowdowns.


But the situation remains on a knife edge as we do not know whether the action plan will work effectively to prevent a financial meltdown. This is partly because some view the action plan as lacking in concrete details.


Markets around the world will pass judgment on the G-7 action plan when they open Monday.


(From The Yomiuri Shimbun, Oct. 12, 2008)

200810120148  読売新聞)


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