China, Japan 'too important' for row: IMF

The shaky global economy needs Japan and China to be fully engaged, the head of the IMF said, warning the world could not afford for the two countries to be distracted by their bitter territorial row.

Speaking to Japanese media ahead of the annual IMF meeting in Tokyo next week, Christine Lagarde said the two economic powerhouses needed to show a bit of neighbourly tolerance for the good of the whole world.

"Both China and Japan are key economic drivers that do not want to be distracted by territorial division," Kyodo News agency quoted Lagarde as telling reporters in Washington, in an interview published today.

"The current status of the economy and the global economy needs both Japan and China fully engaged," she said.

China and Japan, the world's second and third-largest economies, are at loggerheads over a group of uninhabited islands in the East China Sea.

Tokyo administers the chain under the name Senkakus, but they are claimed by Beijing, which calls them the Diaoyus.

Chinese government ships regularly venture into waters around the islands, routinely ignoring orders to leave by Japanese coastguard vessels.

Increasingly vitriolic diplomatic exchanges, including at the United Nations in New York last week, and mass anti-Japanese protests in several Chinese cities have further unsettled the pair's already fractious relationship.

Japanese firms operating in China were forced to shutter or scale back their operations when mobs attacked factories and shops. Some companies also complained of tightened customs inspections and difficulties obtaining visas for their foreign staff.

Lagarde said neighbouring countries had to display "a certain degree of tolerance" if they were to rub along effectively.

The IMF managing director was speaking ahead of her trip to Japan next week when Tokyo hosts meetings of the IMF and the World Bank, in what will be the world's largest single gathering of finance officials, bankers and non-government organisations.