Global Financial Leaders Avoid Public Rift With Japan

At the end of two days of talks among the Group of 7 finance ministers outside London, other nations appeared to accept — at least for now — Japan’s explanation that its new monetary efforts were meant to stimulate its domestic economy, rather than to drive down the yen on international currency markets.

The chancellor of the Exchequer in Britain, George Osborne, said on Saturday that ministers from the G-7, made up of the United States, Germany, Japan, Britain, Italy, France and Canada, had reaffirmed earlier commitments on exchange rates and agreed to make sure policies are “oriented towards achieving domestic objectives.” Other officials described the talks as in-depth and positive. Last week, the dollar breached the 100-yen mark for the first time in over four years.

The two-day meeting, in Buckinghamshire, also focused on efforts to stem tax avoidance and on banking reform, and Mr. Osborne said it was “important to complete swiftly our work to ensure that no banks are too big to fail.” The officials discussed efforts to create a European banking union, which have slowed in recent months.

“We agreed on the importance of ensuring banks’ balance sheets are adequately capitalized to enable them to play their role in supporting the economy,” Mr. Osborne said.

The talks took place against a background of growing austerity fatigue in Europe, and concern that the region’s focus on reducing deficits and debt risked driving some economies into a downward spiral.

One United States Treasury official, who spoke on the condition of anonymity, said there was a recognition that, because of the economic weakness in southern European nations like Greece, Portugal and Spain, it was “more important than ever” to have higher private demand in the euro zone countries that are performing better. Germany has the most room to lift demand, although the Treasury official did not identify it or other countries by name.

The official added that recent, positive suggestions that France and Spain should have more time to reduce their budget deficits would be helped by “a greater contribution of private demand” from better-performing European countries.

But a German official, who also spoke on the condition of anonymity, disputed any consensus on that point, noting that there was no official statement on the matter after the meeting. As planned, no communiqué was issued after the event. The idea of stimulating domestic demand is contentious in Germany, in part because of the risk of stoking inflation.

Nevertheless, the German finance minister, Wolfgang Schäuble, seen as one of the main architects of the euro zone’s austerity policies, has shown some signs of greater flexibility and said, before the meeting, that he supported the European Union’s move to give France and Spain more time for deficit reduction.

Slow growth in much of the developed world, and particularly in Europe, provided an uncertain backdrop to the meeting, despite efforts by several central banks to stimulate economic activity.

Article source: http://www.nytimes.com/2013/05/12/business/global/financial-leaders-avoid-public-rift-with-japan-over-yen.html?partner=rss&emc=rss