Finance leaders of major industrial countries meeting in Japan need to find ways to use all the "policy levers" they have to help counter anxiety over global economic prospects, U.S. Treasury Secretary Jacob Lew said Friday, in remarks echoed by his Japanese hosts.
The consensus was that while there is no one-size-fits-all approach, all economies are facing a stifling lack of demand, and the private sector must play a pivotal role in helping spur growth. Finance ministers and heads of central banks of the Group of Seven spent Friday discussing ways to use monetary policy, government spending and longer-term reforms to help support growth.
"The G-7 is meeting at a significant time not because it's a time of crisis, but it's a time when there's a lot of uncertainty in the global economy and there a need for us to talk to each other about what we're seeing and what tools we have to use to promote the most balanced use of all the policy levers that we have," Lew said in a briefing. Japanese Finance Minister Taro Aso reiterated Tokyo's desire to keep exchange rates stable, but also its commitment not to engage in "competitive devaluation of currencies."
He told reporters that there was a recognition at Friday's meeting that each country faces its own particular challenges and circumstances and must adapt policies to suit them. Some, like Japan, need to spend but are constrained by mounting public debts and need the private sector to do more. "The difference between countries is such that there are those that may or may not have sufficient financial room, and those that have room but cannot implement as it is set by the law," Aso said. "There are such countries, so we don't unilaterally force things, we cannot and we don't do that." Most of the governments of the G-7 favor more pro-active government spending to help support flagging growth, while Germany has remained more conservative on fiscal matters, regarding structural reforms as crucial.
Prime Minister Shinzo Abe pledged bold moves to restructure Japan's economy and revive its competitiveness after taking office in late 2012. But after more than three years it's become clear such changes are politically difficult and will take time. Aso said Friday's talks also touched on nonfinancial risks to growth, such as the refugee crisis, terrorism and a looming referendum in Britain over whether or not to leave the European Union. Such a move is viewed as likely to cause major disruptions both in Europe and in global financial markets.
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