G7 warns that Brexit could cause 'shock' to global economy
Kazuhiro Nogi (AFP)
G7 ministers warned Saturday against members manipulating their currencies, coming down against host Japan whose plans to tame the resurgent yen ignited a policy split in the club of rich nations.
The Group of Seven finance ministers and central bank governors also warned of the risks from a "shock" to the world economy if Britain votes to leave the European Union next month.
Their comments came at the end of two days of talks at a famous hot spring resort in northern Japan, focused on how the G7 can stoke the lumbering world economy which they said was under threat from an array of challenges.
"Uncertainties to the global outlook have increased, while geopolitical conflicts, terrorism, refugee flows, and the shock of a potential UK exit from the European Union also complicate the global economic environment," they said in a statement.
Japan came under pressure over its repeated threats to intervene in forex markets to reverse a rally in the yen, which had put it on a collision course with its G7 counterparts.
US Treasury Secretary Jacob Lew kept up the pressure Saturday with a fresh warning, saying that commitments to "refrain from competitive devaluation and communicate closely have helped to contribute to confidence in the global economy."
Washington's policy is that the yen's recent strengthening, which has dealt a blow to Japan's exporters as the economy is hit by a slowdown, did not justify a market intervention.
In closing statements which were a clear rebuff to Japan, the group "reaffirmed existing G7 exchange rate agreements" and "underscored the importance of all countries refraining from competitive devaluation."
A softer currency has been one of the pillars of Prime Minister Shinzo Abe's more than three-year effort to revitalize the world's third-largest economy.
Japan last intervened in currency markets around November 2011, when it tried to stem the yen's rise against the greenback to keep an economic recovery on track after the quake-tsunami disaster earlier that year.
The finance chiefs, whose leaders will hold a summit in Japan next week, also vowed to cooperate in countering the financing of global terror.
"Countering violent extremism and bringing perpetrators to justice remain top priorities for the whole international community," said the group, which takes in the US, Japan, Germany, France, Italy , Canada and Britain.
They identified "targeted financial sanctions" as critical to hindering the networks that support terrorist organizations and emphasized the need to freeze terrorist assets including those of individuals.
"The G7 commits to working together to strengthen the global fight against terrorist financing," they said.
In or out?
As the vote on Britain's future in the EU draws closer, finance minister George Osborne said his meetings with G7 counterparts underscored the gravity of the in-out decision.
If voters opt to quit the bloc in a June 23 referendum, Britain would find it "extremely difficult" to conclude trade deals with European Union countries, he told the BBC.
"If Britain left the EU, and wanted access to the single market... then we would need to pay into the EU budget and we'd have to accept free movement of people but we'd have no say over those policies at all."
"We would have a two year period to negotiate our exit with 27 other countries, we'd then have to negotiate new arrangements...and at the same time conclude over 50 trade deals with countries that aren't even in Europe."
During that extremely difficult process, businesses would have "no certainty" about the future and so would not take on new workers or invest, he said.
"It hits people's incomes, it hits the value of houses, it hits businesses and jobs. People are beginning to understand that," Osborne said.
With just over a month to the vote, the "Remain" camp is on 55 percent and the "Leave" campaign on 45 percent, according to the What UK Thinks website's average of the last six opinion polls.
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But then, they have a record of predicting things . . . utterly wrong that is.