Japan warns France to stick to fiscal reform plans

Agence France-Presse
Japan says election results in France and Greece may have 'destabilizing' effects on markets

TOKYO – Japan on Tuesday warned French president-elect Francois Hollande to keep the nation’s fiscal discipline in place amid worries the new leader will overspend in a bid to boost the economy.

“Our stance is unchanged,” Finance Minister Jun Azumi told a regular news conference in Tokyo, according to Dow Jones Newswires.

“We want (France) to do what has been decided so far, and I’d like to tell them about that if there is the opportunity.”

On Monday, Azumi said Hollande “fully understands” the need for rebuilding European finances, despite his calls to review the European Union’s fiscal pact to include measures to spur growth. The treaty now stresses austerity efforts.

“I want him to act based on understanding the schemes and thinking that we, the IMF, and the G-7 have cultivated up to now,” Azumi said.

Azumi also said on Monday that election results in France and debt-strapped Greece could have a “destabilizing” effect on the markets, warning traders against speculative currency moves.

The finance chief said he would respond “properly and appropriately” to any speculative-driven gains in the yen, which makes Japanese exports less competitive, and reduces the value of Japanese firms’ foreign income.

Japan, which has the world’s third-largest economy, has previously intervened in currency markets to tame the yen’s soaring value.

“I think there is a chance they are becoming a destabilizing factor,” Azumi said of Hollande’s victory, while Greek voters punished pro-austerity parties.

“We must closely watch whether there are speculative movements taking advantage of political factors,” he told reporters.

The election outcomes are seen as a backlash against austerity measures aimed at battling the eurozone crisis, as pushed by French President Nicolas Sarkozy — who lost to Hollande — and German Chancellor Angela Merkel.

Following the elections, the euro skidded to $1.2954 in early trade Monday, its lowest level since late January, while also slumping to 103.22 yen at one stage, its worst since mid-February.

On Tuesday, the single unit was trading at $1.3032 and 104.22 yen.

Following the election results, Japanese Prime Minister Yoshihiko Noda congratulated Hollande during a brief telephone call and told him France is a “strategic partner” of Japan, according to a foreign ministry official.

The pair agreed to work together on Europe’s debt crisis and North Korea’s nuclear programme, the official added.

Last month, Japan pledged about $60.0 billion to the International Monetary Fund, calling the contribution a critical part of the organisation’s bid to boost a global firewall against Europe’s debt crisis.

Azumi said at the time that Tokyo’s help was “crucial not only to the eurozone but also to Asia and Japan if we are to ensure that the crisis is completely over.”

Japan’s move came as a strong yen and sinking demand in key European markets dented its export-oriented economy, with Tokyo a regular buyer of debt issued by the European Financial Stability Facility bail-out fund since last year. – Rappler.com