Global Courant 2023-05-13 12:39:42
Janet Yellen, US Treasury Secretary, right, and Jeremy Hunt, UK Treasury Secretary, left, at a bilateral meeting in Niigata, Japan, on Saturday, May 13, 2023.
Bloomberg | Bloomberg | Getty Images
Finance leaders from the Group of Seven (G-7) wealthy countries warned of rising global economic uncertainty on Saturday as they wrapped up a three-day meeting overshadowed by a deadlock on the US debt ceiling and the fallout from Russia’s invasion of Ukraine.
The heads of the G-7 central banks have also vowed to fight “increased” inflation and to ensure that expectations about future price movements remain firmly anchored, a sign that many of them will not be wary of the intractable high inflation.
The meeting in the Japanese city of Niigata came as concerns about a US default fueled uncertainty about the global outlook, already clouded by recent US bank failures and signs of a slowdown in the Chinese economy.
“The global economy has shown resilience to multiple shocks, including the COVID-19 pandemic, Russia’s war of aggression against Ukraine and associated inflationary pressures,” finance ministers and central bankers said in a post-meeting communiqué.
“We must remain vigilant and remain agile and flexible in our macroeconomic policies amid heightened uncertainty about the global economic outlook.”
The communiqué did not mention the stalemate of the US debt ceiling, which is hitting markets at a time when borrowing costs are rising due to aggressive monetary tightening by US and European central banks.
US Treasury Secretary Janet Yellen, who has said a first-ever US default could occur in weeks if the deadlock is not resolved, told Reuters on Saturday it was “tougher” than in the past, but said she remained hopeful that a solution could be found. .
Japan’s Finance Minister Shunichi Suzuki told a press conference after chairing the meeting that the debt ceiling confrontation was discussed during the global economy dinner session on Thursday. He refused to elaborate.
UK Chancellor of the Exchequer Jeremy Hunt said it would be “absolutely devastating” if the United States failed to agree on raising the federal lending limit and its economic growth were “knocked off track” .
China looms
To reassure investors in the wake of the recent US bank failures, G-7 finance leaders maintained their April assessment that the global financial system was “resilient.”
But they pledged in the communique to address “data, oversight and regulatory gaps in the banking system.”
Many central banks are facing a turning point, with aggressive interest rates
increases that begin to cool growth and upset the banking system.
Bank of Japan Governor Kazuo Ueda, who chaired the discussion on monetary policy, said most central banks appeared to be feeling the impact of past rate hikes but had yet to fully show up as they look to steer future monetary policy.
“Many said they want to steer monetary policy keeping that point in mind,” he said at the press conference with Suzuki.
The group reiterated its condemnation of Russia’s invasion of Ukraine and pledged to strengthen surveillance of cross-border transactions between Russia and other countries.
China has also been on the minds of the G=7, with Japan spearheading efforts to diversify supply chains and reduce their heavy dependence on the world’s second-largest economy.
In their communiqué, finance leaders set a deadline at the end of the year for launching a new plan to diversify global supply chains.
The new arrangement means that the G-7 will provide assistance to low- and middle-income countries so that they can play a greater role in supply chains for energy-related products, for example by refining minerals and processing production components.
“Diversification of supply chains can help ensure energy security and help us maintain macroeconomic stability,” the statement said, adding that the scheme will be launched “at the latest by the end of this year”.
The communiqué did not mention any idea signaled by the United States to consider imposing targeted restrictions on investment to China to combat Beijing’s use of “economic coercion” against other countries.
But it said G-7 countries will work to ensure foreign investment in critical infrastructure “does not undermine the economic sovereignty of host countries”.
Talks between finance leaders will lay the groundwork for the G-7 summit starting Friday in Hiroshima, where concerns over China’s use of “economic coercion” in its dealings with foreign countries will be one of the main talking points.
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