10 February 2008

Japanese times: G7 finance chiefs vow to help markets

The Group of Seven finance ministers and central bank chiefs vowed Saturday to help stabilize volatile situations in financial markets but stopped short of proposing concrete measures, including unified interest rate cuts, to fend off a global recession.

Finance chiefs from the Group of Seven industrialized countries join a photo session Saturday in Tokyo before starting discussions on the global economy. "We stand ready to take any further action necessary to enhance stability in the financial market," the financial chiefs said in a joint statement released after their one-day session in Tokyo. Despite expectations from market watchers and analysts for coordinated action, however, the statement did not mention any measures.

Commenting on the global economy, the G7 said the world faces a "more challenging and uncertain" environment than when they last gathered in Washington in October. "In all our economies, to varying degrees, growth is expected to slow somewhat in the short term, reflecting wider global economic and financial developments," the statement said.

The finance and central bank chiefs also acknowledged the risks in the U.S. economy, which is being pushed into recession by the slow-motion train wreck that is the subprime mortgage loan crisis, saying they are now more skewed to the downside.

But the statement added that the long-term fundamentals of the U.S. economy are sound and that it is expected to continue growing this year.

The statement also urged oil exporters to increase production amid worldwide concerns about rising oil prices.

Touching on the Chinese economy, the statement urged China to allow the yuan to appreciate more quickly.

Finance Minister Fukushiro Nukaga, who chaired the meeting with Bank of Japan Gov. Toshihiko Fukui, said at a news conference to conclude the meeting that the G7 members were united.

"I think that G7 member countries shared the same views and presented to the world an important message for global financial market stability."

"We will continue to closely watch developments and take necessary actions, individually and collectively, in order to secure stability and growth in our economies."

Although the G7 statement did not list specific measures, the response was within range of market watchers' expectations.

Earlier, the G7 had dashed any hopes of concerted international action, such as coordinated interest rate cuts and fiscal stimulus packages, because economic and fiscal conditions differ from country to country.

Ahead of Saturday's meeting, member countries, including Japan and the EU countries, echoed sentiment that there was limited room for measures to stimulate demand, especially in debt-laden Japan.

"Each country needs to take a step, and it is important to push that move based on its own economic and fiscal situation," Nukaga said at the news conference, exposing the limits of concerted action.

Before the G-7 session, Finance Minister Fukushiro Nukaga and U.S. Treasury Secretary Henry Paulson agreed in a morning meeting to work closely on stabilizing the global economy, the Finance Ministry said.

Finance leaders from China, Russia, South Korea and Indonesia were also expected to join the G-7 for dinner and discuss similar issues as well as the Asian economies.

The G-7 meeting came as the spreading fallout from the U.S. subprime mortgage crisis is causing global stock markets to tumble. Some economies are slowing, and some central banks are cutting interest rates in an effort to calm turbulent markets and ease fears of a global slump resulting from the credit crisis.

The International Monetary Fund last month cut its 2008 forecast for global economic growth to 4.1 percent from its previous forecast of 4.4 in October, as the credit crisis continues to weigh on the global economy. In 2007, the global economy grew a preliminary 4.9 percent.

He also urged financial institutions to disclose more information about their losses.

The meeting also follows moves by the European Central Bank to soften its inflation-fighting stance amid growing uncertainty and risk regarding the EU economy.

Take action: Paulson The Associated Press U.S. Treasury Secretary Henry Paulson urged the world's wealthiest nations Saturday to respond "resolutely and proactively" to the instability shaking global markets but warned that the volatility would take time to resolve.

Paulson, in a statement after a meeting of the Group of Seven finance chiefs, also expressed confidence in the long-term health of the U.S. economy and said a stimulus package passed recently by Congress would provide a much-needed boost.

By KANAKO TAKAHARA and SHINICHI TERADA

© Graham Bishop