Japan should start negotiations for an FTA with the EU

Tokyo

EUROPEAN creditors involved in the confrontation with Greece have expended a lot of high-powered diplomacy on Japan in the last few months. My assumption is that a great deal of this is focused on how Japan would react to the International Monetary Fund (IMF) in the case of a Greek default.

People tend to forget that Japan is the No 2 contributor to the IMF after the US. So a lot of Japanese money is at stake if - as seems increasingly likely - Greece fails to repay its official loans. In contrast with China, which has a quota at the Fund smaller than that of the Netherlands and Belgium combined, the Japanese quota marginally exceeds Germany's. All this is important in terms of Japanese finance outstanding to Greece. Although the IMF likes to be seen as a senior creditor, one needs to remember that if ever Greece defaults on official loans, the first and most likely candidate for non-repayment is the IMF.