Friday given the go to the G7, the meeting of the most important Finance Ministers and Central Bankers. The host, this time is the Japan. On the agenda there were the monetary policy measures, the slow growth and the Brexit question, but the event has highlighted deep contrasts on these issues among its participants. Everyone wanted to have his say on the use of non-standard monetary policy and on a more sustainable way to power world growth.
The two days of G7 has seen Japan, the host country, try to solve the consequences produced by its monetary policy. Japanese monetary policy implemented so far has led the strong rally in the yen that hit exports and consumer sentiment.
If Japan intervened in the market to reverse the rally of its currency, however, it could lead to a collision with the other countries participating to the G7, including Germany and the United States, that are adverse to such solutions.
A rift on monetary policy guidelines, including the manipulation of currencies, was the absolute star of this G7. Many economists predicted that the meeting would have ended in a stalemate: once again it was not possible to get a concrete response to address the risks that hinder the world economic growth.
After years in which they resorted increasingly to print new currency, monetary policy has now surpassed its limits and the G7 response to low inflation and to a moderate growth has become less and less effective.
The leaders of Finance met in Sendai in northeastern Japan, in an informal symposium prior to the meeting of the official G7 on Friday. They were looking for solutions and advice from various academics, including Nobel economist Robert Shiller, on how to support growth.
Participants agreed that, instead of focusing on short-term stimulus from monetary policy, structural reforms combined with adequate investment would be the solution for sustainable growth.
If so, Japan should say goodbye to hopes of reaching an agreement on the need for coordinated action to stimulate global demand.
Germany has not given any sign of sharing the requests from Japan and warned about the dangers of excessive monetary easing. The German Minister of Finance Wolfgang Schaeuble said “There is a high nervousness on the worldwide financial markets, “and the real problem is that is fueled by the strong public debt and excessive liquidity.
The participants of the G7, probably, they would never oppose if Japan had announced tougher action using instruments of monetary policy and structural reforms.
This means that the G7, despite the weight of the risks in the global economic outlook, has failed to agree on concrete measures to support the already sluggish global growth. This gave reasons to economists’ expectations.
The comments about the Brexit have focused on the fact that ‘it might, in the short term, lead to turbulence in the financial markets’.
The governor of the Bank of Japan, Haruhiko Kuroda, said to the journalists before the meeting “I expect a direct exchange of views on how to achieve price stability and growth with monetary, fiscal and structural policies that reflects the needs of each country’.