World leaders gathered on Wednesday for a summit on tackling the global financial crisis but many were split on the way forward, as data from Japan and the United States illustrated the magnitude of their task.
The Group of 20 meeting has been dogged by rows even before it starts in London on Thursday with Japan’s prime minister launching the latest salvo by hitting out at European claims that fiscal stimulus is not the answer.
While Tokyo and Washington favour pumping more money into economies to spur growth, European nations — led by France and Germany — are sceptical about spending more than they have and say tighter global financial regulation is the priority.
But in an interview with the Financial Times newspaper, Japanese Premier Taro Aso hit out at their stance.
”Because of the experience of the past 15 years, we know what is necessary, while countries like the US and European countries may be facing this sort of situation for the first time,” he said.
”I think there are countries that understand the importance of fiscal mobilisation and there are some other countries that do not — which is why, I believe, Germany has come up with their views.”
On Tuesday French President Nicolas Sarkozy threatened to walk out of the summit if leaders refuse to address his calls for stronger regulation to head off future crises.
The White House has rejected reports of any rift, and President Barack Obama, who arrived in London on Tuesday, has said any talk of regulation versus stimulus was a ”phony debate”.
However, back home a survey found that 51% of Americans want Obama to pull the plug on troubled banks without extending any more bailout money.
The Zogby poll said there should be no more federal funds even if that means banks going out of business and just 6% said bailout money should continue.
Meanwhile, grim news continued to mount for the world’s leading economies as Japan’s most closely watched measure of business confidence fell to an all-time low.
The Bank of Japan said its quarterly Tankan poll of large makers of electronics, cars and other products found confidence had tumbled to minus 58, even lower than the minus 57 recorded in 1975, in the wake of the oil shock.
The index measures the percentage of firms that think business conditions are good minus those that think they are bad.
”This Tankan clearly showed that the Japanese economy is literally faced with the worst recession in the nation’s post-war history,” said Hideki Matsumura, a senior analyst at the Japan Research Institute.
The figures follow recent data that revealed Japan’s exports are about half what they were a year ago, unemployment is at a three-year high and consumers are spending less.
In the US hopes for a turnaround for the world’s biggest economy were hit when figures showed home prices in the 20 largest cities fell by a record 19% in January from a year ago.
The Standard & Poor’s/Case-Shiller survey showed on Tuesday that the year-on-year decline was steeper than analysts’ consensus forecast of an 18,6% drop, and eclipsed December’s record decline of 18,5%.
A separate index of home prices in the 10 largest metropolitan areas also posted a record decline, of 19,4% from January 2008.
The two monthly indices have fallen steadily since October 2007.
”Home prices, which peaked in mid-2006, continued their decline in 2009,” said David Blitzer, head of the index committee at Standard & Poor’s.
”There are very few bright spots that one can see in the data. Most of the nation appears to remain on a downward path,” he said.
And in China, the economic powerhouse continued to show signs of the damage caused by the global downturn as a leading tracking index showed manufacturing shrank for an eighth straight month in March.
The CLSA China Purchasing Managers Index, a closely watched indicator in the world’s third-largest economy, fell to 44,8 in February from 45,1 the previous month. Any number below 50 means manufacturing has shrunk.
Manufacturing accounts for more than 40 percent of the economy in China, which has been hit hard by evaporating demand for its products in key export markets such as the US and Europe.
In Asia markets were mixed, with Tokyo closing 2,99% higher while Hong Kong shed 1,03% in morning trade.
European markets slipped as investors switched their focus to the upcoming G20 summit. London’s FTSE 100 index dipped 0,08% to 3 922,88 at the start of trading. — AFP
