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DJ Japan Tanigaki: IMF Shouldn't Overemphasize Forex(Comtex Finance Via Thomson Dialog NewsEdge)WASHINGTON, Apr 22, 2006 (Dow Jones Commodities News Select via Comtex) --The International Monetary Fund shouldn't place too much emphasis on exchange rate surveillance as it's just "one element" of a comprehensive policy dialogue, Japanese Finance Minister Sadakazu Tanigaki said Saturday. Tanigaki, in a speech to the International Monetary Fund's policy steering committee, also played down the role exchange rate flexibility in emerging Asia could play in reducing global imbalances. "I do not deny that exchange rate flexibility in emerging Asia could play a certain role in the course of reducing imbalances, but I believe what is paramount now for each member country and region is to implement steadily the policy measures needed to strengthen its respective economic fundamentals," Tanigaki said in the text of the speech to the International Monetary and Financial Committee. The remarks suggest that Japan, while broadly agreeing to IMF reform and the need to tackle global imbalances, is distancing itself from U.S. calls for the IMF to police foreign-exchange rates with an eye to prodding China into allowing the yuan to move higher and help ease the gaping U.S. trade deficit. In a list of proposals for IMF reform, the institution's Managing Director Rodrigo Rato has said more emphasis must be given to exchange rate surveillance in assessing macroeconomic policies. Tanigaki said this direction "needs to be pursued with care" and that surveillance should "avoid focusing narrowly on an analysis of a specific exchange rate regime." In a sign of growing momentum to tackle imbalances, Group of Seven nations' finance ministers and central bank governors, in a statement issued after their meeting Friday, said "greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur." Though not unprecedented, it's unusual for the G7 to name a certain country when calling for policy changes. While the reference to China may have reflected the strong desire among G7 nations, particularly the U.S., for Beijing to allow the yuan to move more freely, Tanigaki told reporters Friday that structural reform, not exchange rate adjustment, should play a key role in curbing imbalances. China manages the value of its currency against the U.S. dollar with a network of capital controls and heavy intervention in the currency market. For almost four years, the U.S. has said China must allow the market to have more influence on the currency. But since the government's one-time 2.1% appreciation of the yuan last summer, it has strengthened only about 1.0% against the dollar. Supports Two-Stage Approach In IMF Quota Reform Tanigaki, in Saturday's speech, repeated his view that emerging Asian economies are markedly underrepresented at the IMF, and called for giving emerging countries more say over IMF decisions by increasing their quota of voting rights in the institution. The IMF should take a "sequenced approach," in which it implements measures that need to be taken urgently and commits to addressing other issues at later stages, Tanigaki said. Specifically, the IMF, by its annual meeting to be held in Singapore in September, should reach "concrete agreement" on ad hoc quota increases for significantly underrepresented members as "the first step toward credible quota reform," Tanigaki said. It should then agree to "tackle the issues of the size and composition of the Executive Board, an increase in the number of basic votes, and the review of the quota formulas," he said. -By Leika Kihara, Dow Jones Newswires; 813-5255-2929; leika.kiharadowjones.com (END) Dow Jones Newswires 04-22-06 1402ET |