Differences over fiscal policy and reforms dominate the agenda of a G7 finance ministers meeting, with a “go-your-own-way” response to weak global growth being the likely result of the two-day gathering in Japan.
Ahead of their meeting in Sendai, northeastern Japan, the finance ministers and central bankers from G7 countries sought advice from prominent academics on Thursday, including Nobel Prize-winning economist Robert Shiller, on ways to boost current anemic global growth.
According to a source cited by the news agency Reuters, participants of the symposium agreed that instead of relying on short-term fiscal stimulus, structural reforms combined with higher investment could be the next steps toward kickstarting the global economy.
“With uncertainty over the global economy on the rise, attention will be paid to macro-economic policy, structural reform and measures to deal with tax evasion … and money laundering,” Japanese finance minister Taso Ado told reporters before kicking off the meeting on Friday.
During the two-day gathering, Aso may be struggling to overcome a widening rift emerging among the most powerful advanced economies on issues ranging from currencies to monetary policy.
Host Japan is keen to win an endorsement for its position that fiscal stimulus is the way to boost growth. But Tokyo’s attempts to increase market intervention to halt a rise in its currency, the yen, is likely to run into opposition from countries such as the United States and Germany which have ruled out such moves.
German Finance Minister Wolfgang Schäuble, for example, warned ahead of the meeting that there was “high nervousness in financial markets,” fostered by huge government debt and excess liquidity around the globe. His French counterpart, Michel Sapin, supported Schäuble’s view, saying: “Today we are in a cooperation phase, and not in an intervention or a currency war phase.”
But G7 officials have already indicated that they would not object if Japan embarks on a course of more fiscal stimulus and structural reforms in its response to weak inflation and subdued growth.
In April, the International Monetary Fund cut its forecast for world growth for the third time in less than a year, as a slowdown in China and other emerging economies fuelled worries that the worst was yet to come.
Brexit, Panama Papers to be addressed
Also on the agenda in Japan is a June referendum in Britain on whether the country should stay in the European Union. G7 finance minister will discuss the possible repercussions of the UK leaving the bloc, with some finance minister fearing a “Brexit” could lead to short-term turbulences in financial markets, according to a G7 quoted by Reuters.
On Saturday, the G7 finance leaders will also discuss the need to boost cyber-security, fight terrorist financing and increase efforts to curb offshore tax havens – an issue that emerged from the Panama Papers scandal a few weeks ago.
The finance ministers are expected to draft proposals on these issues for a regular summit of G7 leaders, due to be held in Japan, next week.
uhe/cjc (Reuters, AFP, dpa)