Japan warned the G20 major economies against focusing narrowly on the trade balance in addressing global imbalances, with its top currency diplomat on Tuesday calling on them to settle trade disputes through a multilateral framework, Trend reports referring to Reuters.
Masatsugu Asakawa, Japan’s vice finance minister for international affairs, said slapping tariffs against each other would do little to fix the imbalance between nations with large current account surpluses and those with deficits.
The Group of 20 members must instead explore policy options to fix persistent global imbalances in a multilateral setting, he said.
“We should recognize there is large room for cooperation between surplus and deficit countries,” Asakawa told an International Monetary Fund seminar.
“Current account is not just about the trade balance” and imposing tariffs “do not have a material impact on the current account balance,” he added.
Rather than focusing too much on bilateral trade imbalances, there should be more attention to capital flows and structural factors that affect current account balances, Asakawa said.
Japan will make tackling global imbalances a priority in deliberations as next year’s G20 chair, as the topic “fits extremely well with the core mandate of G20,” he said.
The G20 has failed to bridge differences on trade as U.S. President Donald Trump caused frictions with other nations by slapping tariffs to try to narrow the huge U.S. trade deficit.
Tuesday’s remarks reflect Tokyo’s hopes that others would join Japan in countering Trump’s focus on getting U.S. trade deficits to narrow through bilateral trade deals, rather than on multilateral agreements now in place.
Among ways the G20 nations could fix external imbalances is for emerging countries to use the huge savings accumulated in advanced economies for investment, Asakawa said.
Advanced countries can benefit from investing in emerging economies by getting higher returns on their savings, which would give their aging populations more money to prepare for retirement, he said.
Asakawa also said the impact a weak yen has in boosting Japan’s export volume has diminished in recent years as companies shift production overseas, and no longer use much the competitive advantage of a weak currency to slash the price of goods they sell abroad.
“It’s a very good thing for Japan’s economy,” he said. “It might mean that the export structure of Japan has shifted to (producing) high-value goods that sell at higher prices.”