SENDAI – Finance leaders from the Group of Seven industrial nations failed to find ways to take coordinated action to revitalize the global economy as they wrapped up a two-day meeting in Sendai on Saturday.
Japan, which hosted the meeting this year, is looking to hammer out a new fiscal package in the coming months, but its push for joint fiscal action was rejected by its more cautious peers, who concluded that the group approach the downside risks of the economy with all kinds of options, including monetary policy and structural reforms.
“I think the notion that there would be one response in each of our economies using exactly the same fiscal, monetary, structural policies doesn’t reflect what each of our economies needs,” U.S. Treasury Secretary Jacob Lew said at a news conference.
He also said now is a time of “uncertainty, not time of crisis,” hinting that there is no need for coordinated action at this time.
Finance Minister Taro Aso said at a separate news conference the same day, “We think it is clear that fiscal spending is a big factor to stimulate demand, and other countries understand that point,” adding there was consensus that demand is necessary for economic growth.
However, he also said each country has its own opinion about how to employ a balanced policy mix.
The content of the ministers’ discussions will be relayed to the G-7 Ise-Shima summit to be held later this week in Mie Prefecture. Prime Minister Shinzo Abe, facing a pivotal Upper House election this summer, has said the economy will be a top priority during the summit. He is apparently weighing a fiscal package that will appeal to voters. His ideal scenario would involve acting in coordination with the other G-7 economies — the United States, Germany, Britain, France, Canada, and Italy — to foster the image that he is leading the effort to spur global growth.
The recent wrangling over the volatile currency market is another topic that grabbed the spotlight at the Sendai meeting.
Tokyo’s recent threat of market intervention to reverse the resurgent yen drew negative reactions, especially from the United States.
Aso has reiterated in past weeks that Japan is ready to intervene in the currency market, declaring it would be justified by the Group of 20 agreements. The G-20 communiques in Shanghai in February and Washington in April affirmed that “disorderly movements in exchange rates can have adverse implications for economic and financial stability.”
But the U.S. Treasury has responded negatively to the idea of Japan massaging the yen. Lew has said Japan needs to focus on stoking domestic demand, and called moves in the foreign-exchange market “orderly.”
During the talks, the G-7 members re-acknowledged the negative impact of disorderly currency movements and their commitment to not engage in competitive devaluation of currencies.
“Over the past few days, I have emphasized the importance of reaffirming our exchange rate commitments, including our agreement to consult closely with one another and to refrain from competitive devaluation,” Lew said.
“Those commitments made in Shanghai, along with our agreement to use all policy levers to boost global growth, have helped to contribute to more confidence in the global economy and I certainly hope that the meetings we have had here in Sendai among the G-7 will have that same effect,” he said.
As for the issue of tax evasion, which has been a globally hot topic following the leak earlier this year of the so-called Panama Papers, the G-7 nations discussed new objective OECD criteria for identifying noncooperative jurisdictions with respect to tax transparency.
Among other issues, the ministers discussed how to cooperate on checking cross-border money flows related to terrorism. They also agreed to reinforce information exchanges not only among G-7 countries, but also with other countries, and to include the private-sector entities rather than just police, tax and other authorities.
Later, the G-7 ministers also welcomed “the pandemic emergency financing facility” set up by the World Bank Group, a scheme that enables swift and efficient disbursement of financial resources mobilizing private funds via insurance mechanisms. Japan pledged it will contribute $50 million to the scheme over three years.