Daily Management Review

A 'go-your-own-way' Approach likely to be agreed Upon by G7 in Absence of New Ideas


05/20/2016




A 'go-your-own-way' Approach likely to be agreed Upon by G7 in Absence of New Ideas
The stage for G7 advanced economies could become one for agreement between the countries to "go-your-own-way" response to address risks hindering global economic growth at their finance leaders' gathering due to a rift on fiscal policy and currencies.
 
The G7 policy response to anemic inflation and subdued growth has become increasingly splintered, as years of aggressive money printing stretch the limits of monetary policy.
To find out more options and ways to boost growth in an informal symposium ahead of an official G7 meeting, Finance leaders gathering in Sendai, northeast Japan, sought advice from prominent academics, including Nobel Prize-winning economist Robert Shiller.
 
Structural reforms combined with appropriate investment are solutions to achieving sustainable growth is what is being viewed as a road to achieving the targets set by tG7 instead of relying on short-term fiscal stimulus or monetary policy, reports the media quoting sources in the G7.
 
Japan's hopes to garner an agreement on the need for coordinated fiscal action to spur global demand would be shattered if that happens, the sources said.
 
Germany warned of the dangers of excessive monetary loosening and showed no signs of responding to calls from Japan and the United States to boost fiscal stimulus.
 
"There is high nervousness in financial markets" fostered by huge government debt and excess liquidity around the globe, German Finance Minister Wolfgang Schaeuble said on Thursday.
 
A call for stronger action using monetary, fiscal tools and structural reforms - catered to each country's individual needs, by Japan however would not be objected, the G7 officials have signaled.
 
That means the G7 finance leaders may be unable to agree on concrete steps to bolster stagnant global growth even while fretting about risks to outlook.
 
"I expect there to be a frank exchange of views on how to achieve price stability and growth using monetary, fiscal and structural policies reflecting each country's needs," Bank of Japan Governor Haruhiko Kuroda told reporters on Thursday.

Placed high on the agenda at Friday's G7 session on the global economy would be Brexit, and the risk of a British vote to exit the European Union in a June referendum.
 
"A Brexit could, in the short-term, lead to turbulence in financial markets," the G7 source said.
 
The need to boost cyber-security, among other topics, would be discussed on the second-day talks on Saturday by the G7 finance leaders.
 
Sources familiar with the group's discussions say that there is a growing awareness among G7 leaders that they need to take prompt action even while policymakers have long spoken about the need to enhance cyber-security as financial transactions become increasingly global.
 
SWIFT has already warned that it was aware of a number of cyber incidents where attackers had sent fraudulent messages over its system following a cyber theft that hit a Bangladesh central bank account in February. SWIFT is the global financial network that banks use to transfer billions of dollars every day.
 
(Source:www.reuters.com) 






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