TOKYO (THE YOMIURI SHIMBUN/ASIA NEWS NETWORK) - Uncertainty in the world economy has increased.
It is a matter of urgency to reconstruct the system of cooperation among the Group of 20 (G-20) member nations and regions so as to sustain growth and stabilise markets.
At a meeting of G-20 finance ministers and central bank governors, finance leaders agreed on an understanding that the downside risks to the global economy have increased.
Finance Minister Taro Aso said: "Some of the risks have partially materialised. We must not let our guard down."
Global financial markets have briefly been shaken by plunges in stock prices, triggered by the US stock market.
The US economy remains solid, but next year the effect of large-scale tax cuts is expected to wane, and there is even fear that the economy will slow down.
The Japanese and European economies have entered a temporary lull, while dark clouds have begun to be seen over the economic growth of China.
It deserves praise that the G-20 has raised its sense of alarm over global economic prospects and has confirmed the importance of wiping out this feeling of uncertainty.
To be noted in particular is a number of risks stemming from the United States.
The plunge in US stock prices on Wednesday was triggered by a spread of views that the Federal Reserve Board will accelerate interest rate hikes, sending long-term interest rates higher.
Anxiety that the interest rate burdens on companies will increase and their business performance will deteriorate caused a plunge in US equities.
At the G-20, many members have reacted to the drops in global stock prices calmly, with the belief that the fundamentals for global economic growth remain good.
Yet the world economy had relied on the US economy as the driver of growth.
Plunges in stock prices can be considered as a turmoil brought about by the vulnerable structure of the global economy, with the United States being the sole powerful economy.
Is the latest market flurry a sign abnormal changes will be ushered into the global economy, or just a temporary adjustment of stock prices that had been on the rise? It is necessary for monetary authorities of the G-20 to discern this carefully.
Rate hikes by the Fed will also cause capital flows out of emerging economies into the United States.
Countries beset with economic anxiety, such as Argentina, have already been hit by sharp declines in the value of their currency.
The drop in currency value will bring about rises in prices of imported goods and increases in dollar-based debts, thus deteriorating emerging market economies.
While promoting such structural reforms as reduction of external debts, emerging economies need to be better prepared for possible impacts from a flight of capital.
They also need to rectify such practices as budgetary handouts, including a massive provision of subsidies to domestic companies, and to put their financial house in order.
Trade frictions originating from the United States are also a serious risk factor for the world. During a discussion at the G-20 meeting, worries about protectionism, with the United States in mind, were raised one after another.
Escalating frictions will raise unease in the markets and among companies, which may stagnate global trade and investment.
There are also fears that high tariffs due to punitive measures may push up prices, thus increasing the burden on consumers and companies in the United States.
Japan among other countries will need to continue pointing out to the United States the possible adverse effects of protectionism upon the US economy, and to urge Washington to exercise self-restraint in taking additional punitive measures.
By mending the cracks that the United States has caused within the G-20, the group should strive for close cooperation in policy areas.
The Yomiuri Shimbun is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media organisations.