TOKYO—The failure of euro-zone countries to deal decisively with the debt crisis is threatening the world economy, Canada's finance minister said Wednesday.
"There is frustration among a number of the ministers about the continued failure of decisive action in Europe," Jim Flaherty told reporters after speaking to business leaders in Tokyo, referring to the Group of 20 industrial and developing economies.
He said that the solution to the problem rests within the euro zone, where a number of members have been hit by debt problems, with Italy the latest area of concern.
"Our view is that the euro-zone countries themselves have adequate tools and adequate resources to address the crisis," he said, adding that the role of bodies such as the International Monetary Fund should be limited to helping other nations, not euro-zone members.
"This is a situation in Europe that has global consequences and already some of the poorer countries in the world have been feeling the effects of the crisis," he said.
Asked if Canada and other nations were building contingency plans to deal with a possible restructuring of the euro zone, he said that G-20 ministers had discussed "Plan B" in case a country decides to leave the common currency, but said that in the end, this was a matter for euro-zone countries.
Mr. Flaherty also expressed somewhat tentative understanding for Japan's intervention in the foreign-exchange market that is designed to bring down the high value of the yen. He said Canada believes market intervention is not supportive for an orderly market, adding, however, that "there are times, from time to time, where in extremis there is a disorderly situation and it's understandable then, and rarely, when a government would intervene."
Japan has said that its action was justified under G-7 policies regarding excess volatility in the markets, but European and U.S. officials have stressed that markets should guide foreign-exchange levels and have been putting pressure on China to stop controlling its foreign-exchange rate.
IMF Managing Director Christine Lagarde offered implicit support Saturday for Japan's intervention, which included estimated yen selling of ¥7.5 trillion ($97.4 billion) on Oct. 31. She said that the intervention "was in line with the spirit of the G-7 and G-20."
Japanese officials have walked a delicate tightrope in recent months as they've spent trillions of yen to keep the yen from surging, but tried to do so without angering allies, who worry that Japan's actions could, among other things, make it harder to pressure China to strengthen its currency. Japan's actions have drawn some veiled criticism from other policy makers.
Earlier Wednesday, Mr. Flaherty met with Japanese Finance Minister Jun Azumi. A finance-ministry official briefing reporters quoted Mr. Azumi as saying that if Europe firmly tackles its debt crisis, Japan will consider further cooperation via the International Monetary Fund.
—Takashi Nakamichi contributed to this article.
Write to William Sposato at william.sposato@dowjones.com
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