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imf Monday, 5 October, 1998, 10:52 GMT 11:52 UK
Solve banks problem, Japan told
Seven ministers
The seven ministers from the UK, Germany, France, the US, Italy, Japan and Canada
Financial leaders of the G7 group of industrial nations have called on Japan to reform its debt-ridden banking system as a matter of urgency.

After a one-day meeting in Washington on Saturday, the group of finance ministers and central bank governors issued a statement that noted Japan's efforts to date to keep its financial system stable and stimulate its economy to pull out of recession.

But it continued: "We stress the importance that we attach to the swift and effective action to strengthen the financial system, including the prompt enactment of measures to support viable banks with public assistance in sufficient amounts."

The meeting agreed that the financial crisis which began in Russia and Asia, posed a growing risk to their economies and resolved to work together to promote growth and financial stability.

"We re-emphasised our commitment to create or sustain conditions for strong domestic-demand led growth and financial stability in each of our economies," the statement read.

The communique said each of the seven countries must promote recovery and financial stability while keeping markets open.

It emphasised that the main danger confronting the global economy now was recession rather than inflation.

The UK's Finance Minister, Gordon Brown, issued an upbeat appraisal of the meeting.

"Words have been replaced by action. We are showing the strong, decisive leadership that's necessary," he said.

"We have got to create the conditions for stability in growth in the world economy in the same way we have done in Britain.

The US Treasury Secretary, Robert Rubin, said: "While these problems have taken many years to develop and undoubtedly will take some time to work through, if we do each play our part there is no reason why we can't work our way through this."

However, market analysts in London reacted negatively to the G7 outcome saying no real decisive measures were taken at the meeting that would restore confidence to battered markets.

Concern over emerging markets

The leaders were worried about what they called the withdrawal of funds from emerging markets.

This part of their discussions centred on Brazil, which has recently seen $1bn a day leaving the country.

There was a special message for the Russian representatives who joined the meeting.

The Russians were told there had to be faster reform and comprehensive restructuring of the financial sector.

The closing statement said the United Kingdom, Canada and the United States, which have experienced strong growth for some time, should "take appropriate action to maintain conditions for sustainable growth."

G10

In a sperate meeting on Sunday, the G10, comprising finance ministers and officials from the G7 nations plus the Netherlands, Belgium and Switzerland, called for tighter supervision of international capital flows in order to avert future financial disruptions.

 WATCH/LISTEN
 ON THIS STORY
BBC News
Economics correspondent James Morgan: "A sense of urgency not usually seen at these meetings"
BBC News
Gordon Brown: Positive about discussions
BBC News
Robert Rubin: Determined to succeed
See also:

02 Oct 98 | The Economy
03 Oct 98 | imf
04 Oct 98 | The Economy
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