TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda gave a spirited defense of multilateralism on Tuesday, saying that questioning the value of globalization along the lines of U.S. President Donald Trump was at odds with 21st century reality.
Kuroda said solely blaming globalization for exacerbating income inequality overlooked the fact that global economic integration was mitigating poverty, including in Asia.
He said countries should overcome their “narrowly-defined self-interest” and coordinate policies from the broader perspective of achieving sustainable economic growth.
“I believe that there is no future in an inwardly obsessed movement turning its back on globalization,” Kuroda told a meeting of the Institute of International Finance on Tuesday.
“Any ring-fencing attempt that ignores ... global interdependencies is inconsistent with the reality of the 21st century,” he said.
Friction over trade has been a key theme of debate among G20 policymakers as Trump’s “America First” platform threatened their commitment to resist protectionism.
Trump’s protectionist statements have caused particular alarm in Asia, given its dependence on global trade. Finance leaders of Japan, China and South Korea last week agreed at a trilateral meeting to resist all forms of protectionism.
On the global economy, Kuroda said it was showing clearer signs of strength with business and consumer confidence picking up, leading to a more active debate in some countries over withdrawing extraordinary levels of stimulus.
“The prevailing pessimism since the global financial crisis, which fostered colorful language such as ‘secular stagnation’ and ‘low-growth trap,’ is clearly on the wane,” he said.
But Kuroda said there were still fragilities that should not be overlooked. Among them was a build-up of dollar-denominated debt in some emerging economies, which made them vulnerable to dollar gains that would boost their debt burden.
He said years of ultra-loose BOJ monetary policy had eaten into domestic banks’ margins, forcing them to take on more risk by investing overseas and in equities.
Authorities must ensure financial institutions have sound risk-management procedures in place, so that they do not take excessive risks in pursuit of profits, Kuroda said.
Japan’s top financial regulator also warned policymakers against over-reliance on monetary policy to spur growth, saying more efforts were needed to nudge banks into lending more to innovative industries with potential.
Additional reporting by Stanley White; Editing by Chang-Ran Kim and Eric Meijer