G7 warns over global economy as currency row flares

Agence France-Presse
G7 finance ministers also oppose Britain's possible exit from the European Union, as well as vow to clamp down on terrorist financing

G7. Japanese Finance Minister Taro Aso (C) chairs the session one meeting of the G7 Finance Ministers and Central Bank Governors meeting in Sendai, Miyai Prefecture, Japan on May 20, 2016. Photo by Kimimasa Mayama/EPA

SENDAI, Japan – G7 finance ministers on Saturday, May 21, voiced concern about the sputtering global economy as they looked for a plan to stoke growth, while a currency policy clash overshadowed their meetings.

The club of rich nations also pledged to tackle tax avoidance in the wake of the Panama Papers investigation and beef up efforts to disrupt the murky world of terrorism financing.

Two days of talks at a hot spring resort in northern Japan focused on how to stoke global growth which they said was under threat from myriad challenges, including terrorism, refugee flows, and the threat of Britain’s exit from the European Union.

The ministers were unanimous in opposing the prospect of a “Brexit,” saying it would inflict a “shock” on the global economy that would only worsen the outlook at a time of geopolitical instability.

Host Japan was keen to get its G7 counterparts on board with the view that fiscal stimulus is the best way to kickstart global growth, but Germany and Britain were cool on the idea.

On Saturday, the group suggested a go-your-own-way approach.

“[We] discussed how to employ a balanced policy mix – monetary, fiscal, and structural – taking into account country-specific circumstances,” they said in concluding remarks.

Japan’s determination to tame the resurgent yen was another sensitive topic, after its repeated threats to intervene in forex markets put it on a collision course with its G7 counterparts.

The yen has seen several steep jumps since the start of the year, soaring more than 10% against the greenback at one stage, in a blow to Japan’s exporters just as the economy slowed.

US Treasury Secretary Jacob Lew kept up the pressure Saturday with a fresh warning, reminding Japan that previous commitments to “refrain from competitive devaluation and communicate closely have helped to contribute to confidence in the global economy.”

Yen clash

In a statement which presented a clear rebuff to Japan, the group “underscored the importance of all countries refraining from competitive devaluation.”

In response, Japanese finance minister Taro Aso said Saturday that he told his US counterpart Tokyo was merely reacting to “one-sided, abrupt, and speculative moves” in forex trading.

A softer currency has been one of the pillars of Japanese Prime Minister Shinzo Abe’s bid to revitalize the world’s number-three economy since he swept to power in late 2012.

Japan last intervened in currency markets around November 2011, when it tried to stem the yen’s rise to keep an economic recovery on track after the quake-tsunami disaster earlier that year.

The G7 finance chiefs also vowed to escalate efforts to disrupt the financing of global terrorist networks.

An action plan that their leaders are to sign at a summit in Japan next week set out measures to step up intelligence-sharing, freeze assets, and tighten reporting rules on international transfers.

“Countering violent extremism and bringing perpetrators to justice remain top priorities for the whole international community,” said the group which takes in the US, Japan, Germany, France, Italy, Canada, and Britain.

“The G7 commits to working together to strengthen the global fight against terrorist financing,” they added.

As the vote on Britain’s future in the EU draws closer, finance minister George Osborne said his meetings with G7 counterparts underscored the gravity of the in-out decision.

If voters opt to quit the bloc in a June 23 referendum, Britain would find it “extremely difficult” to conclude trade deals with EU nations while also trying to reach new agreements with non-EU countries, he told the BBC.

During that difficult process, businesses would have “no certainty” about the future and would not take on new workers or invest, he said.

“It hits people’s incomes, it hits the value of houses, it hits businesses and jobs. People are beginning to understand that,” Osborne said, winning firm backing from German Finance Minister Wolfgang Schaeuble.

“We were all of the opinion that it would be the wrong decision for the UK,” Schaeuble said Saturday.

“But it’s a decision to be taken by the British voters. We’re concerned that it could have negative consequences for the European and the world economy.” – Hiroshi Hiyama, AFP / Rappler.com

Add a comment

Sort by

There are no comments yet. Add your comment to start the conversation.