The year 2008 began with utter market chaos in which New York crude oil futures hit a record high and stock prices in the United States and Japan plunged partly due to the soaring oil prices.
Oil prices have risen more than three times in the past five years. Such extraordinary price hikes were brought about by complicated factors such as international concerns over the imbalance between demand and supply of oil and other structural energy issues as well as the increasingly volatile situations in oil producing countries in the Middle East amid the quagmire of the U.S. invasion of Iraq.
The key factor, however, is the influx of vast amount of speculative funds into the oil market aimed at exploiting the complexity of the market.
The collapse of the U.S. subprime mortgage loan market has shaken financial markets in developed countries. Financial products incorporating these loans have been set up as the cutting-edge securities and have spread to financial institutions in the U.S., Europe, and Japan.
Speculative funds have flowed out of financial markets into not only the oil market but the grain markets, hitting livelihoods with rises in food prices. Thus, the enormous amount of speculative money has begun to wield its power over food and energy, the very basis of human existence. It is an urgent international task to curb the rampage of speculative money in order to safeguard people’s livelihoods and stabilize economies.
The Japanese government, however, turns its back on the rising international call for regulating speculation.
Regulation of speculative money came up as an agenda item at the G-8 Summit held in Heiligendamm in Germany last June under the initiative of the host nation. At the Financial Ministers’ meeting held prior to the Summit, Germany called for increasing direct regulation of speculative funds such as requiring hedge fund monagers to release information on their assets and transaction records.
Japan, along with the U.S. and Britain, expressed opposition to the German proposal, leading to its demise.
Former German Vice Chancellor Franz Muntefering is severely criticizing the growth of speculative funds and its calling for imposing monitoring and regulations on their activities. Former French Prime Minister Michel Rocard is also calling for strengthening regulations on speculative funds across Europe.
While regulation of speculative funds has become a major international issue, the Japanese government is following the U.S. position in defiance of international public opinion. The government has even been attracting speculative funds into domestic markets under the name of economic vitalization and promoting the casino economy.
The U.S. and Japanese governments are resisting regulating speculative funding because major financial institutions are making enormous profits out of hedge fund ventures.
