Ryozo Hayashi is a consulting fellow at the Research Institute of Economy, Trade and Industry, IAA (RIETI), and professor at the Graduate School of Public Policy, The University of Tokyo.
General Observations
During the Toronto G20 Summit, the front page headlines in Japan concerned big national political and social events rather than the summit proceedings. The upper house election is scheduled for July 11 and is expected to be a close call, with the possibility of a coalition change. In addition, the first meeting between Prime Minister Kan and US President Barack Obama captured more editorial attention than the summit itself, as the deterioration of US-Japan relations significantly contributed to Prime Minister Hatoyama’s resignation. Furthermore, the unexpected success of Japan’s soccer team in the FIFA World Cup occupied many pages in the major newspapers. Sumo wrestling scandals were also bigger issues for the public than summit meetings.
The Role of the G8 in the G20 Era
A few commentators described the confusion over the role of the G8. Canada, as the chair, tried to make the G8 summit in Huntsville a meeting focused on political issues, while promoting the G20 as the supreme forum for global economic policy. However, economic policy was the major agenda item discussed by the heads of G8 nations.
While the limitations of the G8 were being widely recognized, Prime Minister Kan suddenly raised the idea of inviting China to G8 meetings, without any previous internal discussion. His remarks, however, reflect general perceptions among Japanese intellectuals. It is expected that the confusion over the role of the G8 in the G20 era will continue for some time.
G20 Conflict or Cooperation
The big players at the summit were the United States, the European participants (Germany, France and Britain) and China. Other players, besides Canada, did not appear in the Japanese media. On the central issues — financial discipline and economic stimulus, external imbalance and exchange market flexibility and regulation of financial institutions — important differences and conflicts were reported by the media. Japan’s exemption from the common numerical target in fiscal discipline was commented on from various perspectives, including: relief for Kan, the seriousness of the Japanese situation, and the expectation of other members for the continuous expansionary economic policy. Chinese manoeuvres on the currency issue were viewed as skillful, but were understood to be interim solutions. The deep conflicts, for which an ideal solution has yet to be found, remained untouched. In the area of financial regulation, the real problems were left for the Bank for International Settlements meetings.
In the end, the summit put forth a show of cooperation (as is usually done), but the wider perception was that any inclination towards real policy coordination has weakened as the crisis level has lowered. The political show for Japanese domestic consumption occupied centre stage. The summit results contained in the Toronto Declaration were essentially the simple accumulation of what had already been decided nationally.
The G20 Framework
The phrase, “strong, sustainable and balanced growth” was not unfamiliar — Japan has been struggling to achieve this for more than a decade. Prime Minister Kan’s economic policy for the election campaign is: “Strong economy, strong fiscal policy and strong social welfare.” These catch phrases and directions were understood, but the important details behind implementation were not at all clear.
In general, the Toronto summit engaged the interest of the elite. The outcomes of the summit will not affect the upcoming election results, even though fiscal discipline is the central theme of the election. While the importance of summit meetings was recognized, they are still essentially remote and technical events that are only a part of the background chorus.
G20 Record of Achievement
The media paid very little media attention to the G20’s record of realizing past summit commitments. Similarly, there was not a lot of media attention on the G8 in Huntsville, with some exceptions. The usefulness of continuing anti-protectionism commitments was recognized. It was accepted, unsurprisingly, that there were no new developments regarding the current World Trade Organization negotiations or on the global warming front.