By Matthew Cowley Of DOW JONES NEWSWIRES
WASHINGTON -(Dow Jones)- The global economy that emerges from the current financial crisis will look very different from the present landscape, Japan Prime Minister Taro Aso said Saturday.
"Global finance ... is mired in a major crisis, a once-in-a-century crisis," Aso said, speaking after the conclusion of a meeting of the Group of 20 heads of state. "But crisis also represents an opportunity. History has proven that once we overcome this crisis, a new order will emerge."
The G20 has established the groundrules for the new system, he said.
"It does no good to simply panic in a crisis, and that is proven by the Great Depression of 1929," Aso said. "Today things are entirely different ... we have a framework for cooperation."
The prime minister said Japan's lessons from the financial crisis of the 1990s provide some guidelines for the current turmoil. Although Japanese assets declined significantly, the size of the overall economy remained steady at around Y500 trillion, he said.
"We disclosed thoroughly and at an early time the nonperforming loans ... and also following the nonperforming loans, where there was a need to recapitalize their capital base, we injected government funds," he said.
"Through macroeconomic policy, we realized it was important to underpin the real economy," Aso said.
Japan also committed to providing $100 billion to the International Monetary Fund so it can help emerging countries hit by the crisis. The prime minister said no other country discussed such an offer, but nations such as China may have taken this thought with them back to their countries.
The credit crisis has shown that credit-ratings agencies were "rather shabby" and "not really trustworthy," and the G20 leaders agreed a need existed to introduce a supervisory system for ratings agencies, Aso said.
The prime minister said that mark-to-market accounting doesn't work in times of crisis and that he "pointed out there is a need for concerted action by countries around the world on these points."
The prime minister returned to "global trade imbalances," a theme that has been present at these heads-of-state meetings in recent years. In what appeared to be a reference to the U.S., he said important countries with large trade deficits need to reduce them.
"We need to rectify (global imbalances), and to do that a key currency country needs to address its persistent deficits, and countries that rely excessively on external demand should strive to expand their domestic demand," Aso said.
The dollar, meanwhile, plays a key role in resolving this crisis. "Through such policy coordination by all countries concerned, we need to strive to support the dollar key currency regime," Aso said.
-By Matthew Cowley, Dow Jones Newswires; 201-938-5692; email@example.com
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(END) Dow Jones Newswires
November 15, 2008 17:45 ET (22:45 GMT)
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