Along the finance track

Taro Aso, Japan’s, minister of finance, says the G20 must take urgent action on the risks and challenges to the global economy, from persistent external imbalances and rising debt inequalities to ageing societies – and the critical need for investment in people

Ten years since the global financial crisis, trade tensions are rising and confidence in multilateralism – the backbone of prosperity and stability since the Second World War – is being challenged. At the same time, widening inequality is destabilising the foundations of democratic institutions.

At such a time, the G20, representing 85% of global gross domestic product, has a duty to uphold its mission to ensure strong, sustainable, balanced and inclusive growth.

To do so, Japan has focused on the following three themes:
1. Risks and challenges to the global economy;
2. Concrete actions to strengthen medium-term growth potential; and,
3. Policy responses to the economic and social changes stemming from both technological innovation and globalisation.

First, we need to act on the risks and challenges to the global economy. Consistent with this core role of the G20, we are discussing the causes of, and possible responses to, large and persistent external imbalances. We believe that the G20, with its global membership, provides a suitable forum to discuss this issue. External imbalances are best addressed by restoring savings-investment balances in the context of multilateral cooperation, rather than bilateral trade measures. In the process, we are paying close attention to the structural drivers behind savings-investment imbalances, such as excessive corporate savings, and exploring policy options to promote the required adjustments.

Ageing also poses wide-ranging and important policy challenges for both the already relatively older countries and rapidly ageing countries. Therefore, the G20 is discussing ageing in a comprehensive manner, covering related issues such as  monetary and fiscal policy implications, labour supply challenges and financial inclusion.

Second, the G20 is focused on concrete actions to strengthen medium-term growth potential. I believe that the G20 should continue to promote quality infrastructure investment as a way of boosting economic productivity. Quality infrastructure investment will bring positive economic and social spillovers over the long run, beyond the value of physical infrastructure itself. Specifically, QII helps mobilise private-sector capital, and forms a solid basis for sustainable growth by generating jobs, building capacity and transferring technologies. At our Fukuoka meeting of finance ministers and central bank governors, we are aiming to agree on high-level principles for promoting QII. Furthermore, sustainable growth needs an enabling environment, which includes enhanced resilience against natural disasters. Disaster risk financing and insurance schemes play a critical role in this regard.

We are also extending our discussion beyond physical infrastructure to investment in people. We are aiming to build a shared understanding of the importance of financing universal health coverage in developing countries, with a view to supporting sustainable economic growth and global health security. We will also hold a joint session of G20 finance and health ministers on the margins of the Osaka Summit.

The G20 is discussing how to address rising debt vulnerabilities in low-income countries. We are emphasising the joint  efforts made by borrowers and creditors, both official and private, so as to enhance debt transparency and ensure debt sustainability.

Third, we will consider how governments can respond to the economic and social changes stemming from technological innovation and globalisation. Both have been drastically changing the economic and social landscape. Consequently, policymakers face the dual challenges of maximising their benefits while minimising the associated risks, without harmful fragmentation of the global economic system.

Specifically, in the area of international taxation, we would like to move the discussions forward on a review of the existing tax framework triggered by digitalisation, in addition to fighting against tax avoidance and evasion. There is an urgent need for the G20 to lend its political support on tax and digitalisation, as some countries have started to act unilaterally, which reduces tax certainty. Japan has been helping set out policy directions for a consensus-based solution by 2020, including developing concrete steps with technical design issues and options for further consideration.

In the financial sector we have begun our work to address the issue of market fragmentation. We will also take steps to harness the potential benefits of technological innovation, such as distributed ledger technology, while mitigating its risks, including those posed by crypto-assets.

Japan seeks to leave a legacy of cooperation and sustainability at the conclusion of our G20 presidency. I look forward to working with all members to achieve this goal.