The G7 Finance Ministerial Meeting at Sendai:
United and Divided
Alissa Wang, Researcher, G7 and G20 Research Groups
May 25, 2016
On 20-21 May 2016, G7 finance ministers and central bank governors met in Sendai, Japan. They displayed a united front against terrorism. However, the ministerial was overshadowed by the failure of the finance ministers and bank governors to come to consensus on coordinated fiscal stimulus measures, and the currency contest between the United States and Japan. The results of this finance ministerial are likely to be a microcosm of the upcoming summit in Ise Shima, and thus preview the prospects for the G7 overall. While G7 members will be brought together by common concerns, particularly in political and security issues, they will struggle to overcome the rifts in economic policy that are immobilizing the group.
At Sendai, the G7 finance ministers and central bank governors released the G7 Action Plan on Combatting the Financing of Terrorism. It included commitments in the four areas of improving G7 information exchange, enhancing preventive measures, collaborating in the implementation of targeted financial sanctions and reinforcing the Financial Action Task Force (FATF ). Finance ministers and central bank governors stated that "the G7 commits to working together to strengthen the global fight against terrorist financing, and to providing continued strong leadership to the work of the FATF and other relevant international organizations in this vital area."
Yet on fiscal and currency issues divisions prevailed. On fiscal stimulus, G7 host Japan, the United States, Canada and Italy called for members to boost fiscal stimulus. In contrast, Germany and the United Kingdom called for fiscal discipline. Japan has recently relied on monetary easing to stimulate domestic demand and is thus pushing for coordinated fiscal stimulus measures from its G7 partners to help. However, Germany remains insistent on maintaining tight fiscal discipline to preserve its balanced budget. The UK agrees.
The US-Japan currency dispute also arose at the finance ministerial. On 21 May, in response to Japan's recent threat of a currency market intervention, the United States issued a warning to Japan against such intervention, saying that "Tokyo has no justification to intervene in the market to stem yen gains."
The Ise Shima Summit, at least in its public interpretation, will likely be dominated by the unresolved concerns from the finance ministerial meeting. Although the G7 has reiterated its will to revitalize the global economy, the failure to reach a coordinated plan on fiscal, monetary and exchange rate policy shows that the G7 may no longer be the leader in global economic governance. G7 members continues to bound by common concerns and ambitions over global economic, political and security issues. However, whether members can back up their common ambitions with coherent plans, actions and policies is still open to question.
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Alissa Wang is a research assistant at the G7 and G8 Research Group, the G20 Research Group, the BRICS Research Group and the Global Health Diplomacy Program, based at the Munk School of Global Affairs in Trinity College at the University of Toronto. She is pursuing an undergraduate degree with a specialist in international relations, a major in global health and a minor in political science. She is an editor for the reports produced by the G20 Research Group summit studies team, an analyst for the G7 Research Group summit studies team, and works on compliance research. Alissa is interested in Chinese history and politics as well as China's role in global governance. She was a member of the field team at the G7 Elmau Summit in Germany in 2015..
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