Sunday, May 22, 2016

G7 finance chiefs divided on forex market, coordinated policy

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

Their comments came at the end of two days of talks at a famous hot spring resort in northern Japan[1], focused on how the G7 can stoke the lumbering world economy which they said was under threat from an array of challenges.

Finance chiefs from the world's biggest developed economies meeting in Japan underscored concerns that global growth is flagging and reaffirmed a pledge not to deliberately weaken their currencies, even as Japan again warned about the yen's surge.

Japanese Finance Minister Taro Aso also brought the host nation's concerns[2] to U.S. Treasury Secretary Jacob Lew over what Japan terms speculative treatment of the yen in worldwide currency markets.

"It's important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don't surprise each other", Lew told reporters on Saturday.

Japan and the United States[3] failed to narrow their gap over the foreign exchange market. "It's a pretty high bar to have disorderly (currency) conditions".

Aso and his US counterpart, Jack Lew, separately met early on Saturday to talk about the yen. But the meeting with Lew did not stop him from issuing verbal warnings to markets against pushing up the yen too much. Aso said he told Lew that "one-sided, speculative trades" have been seen in the market, something that Tokyo considers undesirable.

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.

As years of aggressive money printing stretch the limits of monetary policy, the G7 policy response to anaemic inflation and subdued growth has become increasingly splintered.

The finance chiefs, whose leaders will hold a summit in Japan next week, also vowed to cooperate in countering the financing of global terror.

Germany has shown no signs of responding to calls from Japan and the United States to boost fiscal spending.

"People are beginning to understand that", Osborne said, winning firm backing from German Finance Minister Wolfgang Schaeuble.

The official also said Japan should ensure its fiscal policy does not hurt its economy, calling for either a delay in next year's scheduled sales tax hike or fiscal stimulus to compensate for the drag on the economy.

While Aso has publicly warned of intervention after the yen's recent rise to 18-month highs, some economic policymakers have signalled that they are not too anxious the yen will derail a fragile economic recovery.

They identified "targeted financial sanctions" as critical to hindering the networks that support terrorist organisations and emphasised the need to freeze terrorist assets including those of individuals.

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  1. ^ Japan (
  2. ^ brought the host nation's concerns (
  3. ^ United States (

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