G7 Set for Global Economic Check-Up

Published July 5th, 2000 - 02:00 GMT

With the global economic machine humming nicely, Group of Seven (G7) finance chiefs meeting in southern Japan this week will merely tinker at the works, with a view to longer-term maintenance. 

But the one cog not turning smoothly is, of course, the host country. 

The Bank of Japan, which wants to lift its "zero-rate" monetary policy, is expected to come under pressure from other G7 members to retain it until the world's second-biggest economy is again firing on all cylinders. 

The gathering of G7 finance ministers and central bankers at Fukuoka, in southern Japan, kicks off a hectic round of diplomacy in Japan this month culminating in the July 21-23 summit of Group of Eight leaders. 

Russia will join the G7 -- Britain, Canada, France, Germany, Italy, Japan and the United States -- to convene the G8 summit on the southern island of Okinawa. 

This Saturday's meeting will prepare the ground for the higher-profile gathering of G8 leaders, and thus does not form part of the annual round of G7 finance chiefs' meetings in which final communiqués are issued to sum up great-power thinking. 

Japan, all too aware that it is in the economic doghouse, will want to stay focused on the big G7 themes of information-technology (IT), international financial reform and debt relief for the world's poorest nations, observers say. 

Russia, which will be an observer at the meeting in the seaside city, has made clear it wants its share of any global debt restructuring. 

The hosts, meanwhile, will seek a "long-term reflection" on the changes being wrought to the world economy by IT, and the attendant risk that the poor could be left further behind, said a European G7 official. 

There will also be an element of fence-mending after an acrimonious row earlier this year over who should lead the International Monetary Fund (IMF) that pitted Europe against the United States, diplomats say in private. 

Germany, thwarted in its desire to see its deputy finance minister Caio Koch-Weser installed as Michel Camdessus' replacement, eventually settled for Horst Koehler to become the IMF's managing director. 

Japan, which had put forward its former finance ministry mandarin Eisuke Sakakibara for the post, was forced to back down in a process that has traditionally seen a European take the IMF top job. 

And Japan will also have to tread warily in its push for a greater say for Asian countries in the running of the Washington-based lender, or even for their own version of the Fund, said the European official. 

"They have become very cautious over an Asian monetary fund, which has caused them to lose face because of American opposition," she told AFP on condition of anonymity.  

"Japan wants to build a consensus before proceeding with the idea."  

If differences can be ironed out, some form of accord may be presented at Fukuoka on reform of the global financial system including the IMF and on international money laundering, the official said. 

Industrial countries forming the Financial Action Task Force on Money Laundering last month named 15 territories, from Russia to Liechtenstein, considered to be money-laundering havens.  

France said it would ask the G7 to penalize the 15 territories and was prepared to end all financial transactions with them, setting the stage for what could be some interesting exchanges on the sidelines with the Russians. 

Japan meanwhile had to expect its share of criticism, said Lehman Brothers economist Matthew Poggi. 

"A lot of the criticism at past G7 meetings has been on Japan for not deregulating quickly enough, so I suppose this will be an opportunity for them to deflect attention from that," he said.  

"But if they were to deregulate more ... this could actually push information-technology forward, which is what they say they want to focus on." -- TOKYO (AFP)  

 

© 2000 Al Bawaba (www.albawaba.com)

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