G7 vows to curb global terror finance; rifts on policy remain

AKIU / AP

The Group of Seven major economies showed a united front on fighting terrorist financing and tax evasion, but shied away from coordinated action on policies to revive stalling growth.
An “action plan” issued after the talks by G7 finance ministers and central bank governors at a hot springs hotel in northern Japan called for increased exchanges of information on financial intelligence, reducing the level of cross-border transactions subject to disclosure and collaborating on targeted sanctions for terrorists’ financial networks, including freezing assets.
“There’s a moment for reflecting, for putting forward ideas, for comparing them, and then comes the moment for action. This is where we are today,” said France’s finance minister, Michel Sapin, whose country has suffered devastating attacks in the past few years.
The talks in Akiu, to be followed by a G7 summit in central Japan’s Ise region next week, started out with a brainstorming session on how best to use monetary policy, government spending and longer-term reforms to help support growth.
But they ended with countries stressing the need for varying strategies for boosting growth.
Most of the governments of the G7 favour more pro-active government spending to help support flagging growth and spur demand, while Germany has remained more conservative on fiscal matters, regarding structural reforms as crucial.
US Treasury Secretary Jacob Lew said the lack of coordinated action, in the absence of a crisis, was natural, given the varying conditions and resources in each country.
“We each have unique challenges that have to be addressed, so it’s not one-size-fits-all,” Lew said. “Different times require different responses. We’re not in 2008 or 2009.”
Lew did express concern, however, over Japan’s plan to raise its sales tax, to 10 percent from the current 8 percent, in April 2017.
“Each of us needs to take policy actions that given the conditions in our country are most likely to produce more demand and more growth,” Lew said, adding that while the decision is up to Japan, “We’d be quite concerned about taking steps that would put a drag on the economy.”
Aso, who has said the tax hike will go ahead unless there is a major crisis or disaster, also acknowledged differences with the US over such issues as exchange rates.
“I met with Secretary Lew and we didn’t have a heated discussion. We had a normal conversation,” Aso said. “We have to say what we think to each other because that’s our jobs. It’s normal to exchange views and that helps ensure things will not go awry because issues become too emotional.”
Lew stressed that he hoped G7 members would honor commitments made during recent discussions in China by the wider Group of 20 major economies, where members pledged to not manip

Major economies warn against manipulating currencies

Sendai / AP

G7 ministers warned on Saturday against members manipulating their currencies, coming down against host Japan whose plans to tame the resurgent yen ignited a policy split in the club of rich nations.
Their comments came at the end of two days of talks at a famous hot spring resort in northern Japan, focused on how the G7 can stoke the lumbering world economy which they said was under threat from an array of challenges. Japan came under pressure over its repeated threats to intervene in forex markets to reverse a rally in the yen, which had put it on a collision course with its G7 counterparts.
US Treasury Secretary Jacob Lew kept up the pressure on Saturday with a fresh warning, saying that commitments to “refrain from competitive devaluation and communicate closely have helped to contribute to confidence in the global economy”.
Washington’s policy is that the yen’s recent strengthening, which has dealt a blow to Japan’s exporters as the economy is hit by a slowdown, did not justify a market intervention.
In closing statements which were a clear rebuff to Japan, the group “reaffirmed existing G7 exchange rate agreements” and “underscored the importance of all countries refraining from competitive devaluation”.
A softer currency has been one of the pillars of Prime Minister Shinzo Abe’s more than three-year effort to revitalise the world’s third-largest economy. Japan last intervened in currency markets around November 2011, when it tried to stem the yen’s rise against the greenback to keep an economic recovery on track after the quake-tsunami disaster earlier that year.