Fragile Japan economy warns France of reforms

TOKYO - Agence France-Presse

A foreign exchange trader looks at a television showing Francois Hollande celebrating his victory in France’s presidential election at a foreign currency trading company in Tokyo. The euro tanked against the dollar after the elections in Greece and France. REUTERS photo

Japan warned French president-elect Francois Hollande yesterday to keep the nation’s fiscal discipline in place amid worries that the new leader will overspend in a bid to boost the economy.

Weekend’s victory for Socialist Hollande -- and the huge losses for the two main parties in Greece -- came amid a backlash against the austerity measures put in place across Europe to tackle the region’s debt crisis.

But Finance Minister Jun Azumi told a regular news conference in Tokyo: “Our stance is unchanged. We want (France) to do what has been decided so far, and I’d like to tell them about that if there is the opportunity,” he added, according to Dow Jones Newswires.

“I don’t know whether Mr. Hollande will immediately act on what he has said in heated debates during the election campaign. But realistically, I think it is impossible (for European nations) to give up on fiscal-rebuilding efforts,” the finance minister said, adding that he was “convinced (Hollande) will respect this movement.” Hollande ousted conservative Nicolas Sarkozy from the Elysee Palace on a platform promising growth rather than further cuts, which has worried many European leaders who fear it will lead to another region-wide crisis.

Azumi said on May 7 that France’s new leader “fully understands” the need to rebuild Europe’s finances, despite his calls to review the European Union’s fiscal pact to include measures to spur growth. The treaty now stresses austerity efforts.

Greece effect

“I want him to act based on understanding the schemes and thinking that we, the IMF, and the G-7 have cultivated up to now,” Azumi said.

Azumi also warned on May 7 that the election results in France and debt-strapped Greece could have a “destabilizing” effect on markets. He added said he would respond “properly and appropriately” to any speculative-driven gains in the yen, which makes Japanese exports less competitive, and reduces the value of their foreign income.

Japan has previously intervened in currency markets to tame the yen’s soaring value amid fears over its impact on the world’s third-largest economy. “We must closely watch whether there are speculative movements taking advantage of political factors,” he told reporters on May 7.

Following the elections, the euro skidded to $1.2954 in early trade on May 7, its lowest level since late January, while also slumping to 103.22 yen at one stage, its worst since mid-February. However, it rebounded later in the day and yesterday.

Japanese PM Yoshihiko Noda congratulated Hollande after his victory during a brief telephone call and told him France was a “strategic partner” of Japan.