Japan faces a challenge in bridging a widening divide over how to revitalize sluggish growth in leading economies at a meeting of top financial officials that began yesterday with the group bashing in the lids of sake barrels.
The finance ministers and central bank governors of the Group of Seven industrial nations were engaging in a local tradition for kicking off festivities, but it was in keeping with what could be a fractious event.
Japanese Finance Minister Taro Aso said the talks that get underway in earnest today would focus on fiscal and monetary policy, the international financial system, sustainable development and issues such as money laundering and tax evasion.
The talks will culminate with a statement for G-7 leaders, who are to meet in Ise, central Japan, next week.
“We, the G-7 countries, are presently faced with many challenges that need to be addressed on the global economic front,” said Bank of Japan Gov. Haruhiko Kuroda.
Over the past three years, Kuroda has sought to revive Japan’s own moribund growth by pumping tens of trillions of dollars into the economy through central bank asset purchases. More recently, the Bank of Japan implemented a negative interest rate policy, hoping to spur more bank lending and corporate investment to help support faster growth.
A group of people protest against climate change and coal investments, ahead of the G7 Finance Ministers and Central Bank Governors’ Meeting, in front of the Ministry of Finance in Tokyo
With monetary policies yielding only middling results, Japan increasingly has favored more pro-active fiscal stimulus, joining France, Italy and Canada, which are increasingly at odds with Germany’s pro-austerity stance.
As finance minister, Aso must answer for Japan’s public debt, which is twice the size of its economy. Yesterday he downplayed speculation that Prime Minister Shinzo Abe, facing a parliamentary election this summer, will put off a hike in the national sales tax.
Baring a major financial crisis or other calamity, such as the devastating tsunami that washed over Japan’s northeastern coast in March 2011, including parts of Sendai, the tax hike will go ahead as planned, Aso said.
But Abe and others have also said they would reconsider if the increase to 10 percent from the current 8 percent risks crippling the recovery. A severe downturn brought on by such a tax increase potentially could do more harm to revenues than good, officials say.
The financial leaders also are at odds over currency policy.
Japanese businesses, and Aso himself, have chafed at a recent rise in the value of the yen against the U.S. dollar, hinting at a possible need to intervene in the markets as exporters’ profits plunge and shares sink, undermining Abe’s efforts to persuade businesses to raise wages and help boost consumer demand.
The dollar has fallen to about 109 yen from a peak of about 125 yen as investors bought the Japanese currency, which traditionally is considered a “safe haven” in times of volatility and uncertainty. But the U.S. Treasury Department recently included Japan among five countries, along with China, Germany, South Korea and Taiwan, on a monitoring list designed to pressure governments to tackle large trade imbalances with the United States. Elaine Kurtenbach, Sendai, AP
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