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Interview

Trade deal would remove 'major' risk to global growth: IMF chief

Lagarde hopes uncertainty gives way to 'mutually beneficial system'

Christine Lagarde, managing director for the International Monetary Fund, speaks to reporters Saturday in Fukuoka, Japan. (Photo by Yukihiro Sakaguchi)

FUKUOKA, Japan -- The head of the International Monetary Fund warned Saturday that trade frictions threaten to undermine the global economy, which is forecast to slow this year.

"We believe that risks are to the downside and clearly the trade tensions are a significant risk on the horizon," IMF Managing Director Christine Lagarde said in an interview with Nikkei group media outlets here.

Although there are other potential risks, including geopolitical uncertainties, "the major one we clearly see at the moment is trade tensions," said Lagarde, who was in Fukuoka to attend a two-day gathering of Group of 20 finance ministers and central bank chiefs.

The IMF forecasts global economic growth to soften to 3.3% this year from 3.6% last year. It expects growth to pick up in the second half of this year and return to 3.6% in 2020.

The outlook would improve if trade-related risks were removed "because the parties decided to negotiate to agree to eliminate tensions and to replace this uncertainty [with a] rules-based, mutually beneficial system," Lagarde said.

Lagarde did not specifically mention the U.S.-China trade war, nor did she comment in detail about U.S. President Donald Trump's decision to hold off on threats he made of additional tariffs on Mexican exports.

"Obviously we have always supported the principle that trade is an engine for growth," Lagarde said. "To the extent that there is sustainable predictability and certainty and no tariffs, this is a good development."

Negotiations between the U.S. and China broke down last month, and the two sides are unlikely to make any progress before Trump and President Xi Jinping attend the G-20 summit in Osaka later this month, U.S. Treasury Secretary Steven Mnuchin said Saturday in Fukuoka.

When asked about financial technology, one of the themes at the G-20 meetings here, Lagarde pointed to the southwestern Japanese city's budding tech industry.

"Because Fukuoka has so many startups, where you have a lot of developments in digital techniques, it is very fitting that we are discussing those topics here."

During the interview, conducted jointly with TV Tokyo and Nikkei Business Publications, Lagarde called for further progress on reducing gender inequality in Japan's business community.

"I would like very much to brainwash some of those corporate executives so that they can finally understand that bringing women in the workforce, particularly the very talented Japanese women, would actually improve the bottom line," she said.

On Prime Minister Shinzo Abe's efforts to support the inclusion of women in the workforce, she said: "When I see that the Japanese budget provides for creating and supporting child care centers, I applaud.

 "I hope this movement will continue because there is an untapped resource in the Japanese community, which is women."

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