BELFAST, NORTHERN IRELAND – The leaders of the Group of Eight called Monday for decisive action to nurture a sustainable recovery at their summit in Northern Ireland, where they gathered to discuss ways to spur the world economy.
Prime Minister Shinzo Abe, resolved to end nearly two decades of deflation and revive Japan’s economy, explained his economic and fiscal policies to his fellow G-8 chiefs, turning “Abenomics” into an international commitment in the process.
“I received positive evaluations from the leaders of other countries about Japan’s economic policy,” Abe told reporters afterward, adding that his peers view the nation’s economy, which he said is on a recovery track, as positive for the global growth.
In a statement issued after a debate on the world economy, the heads of the world’s most industrialized countries agreed that advanced economies need to balance the support of domestic demand with structural reforms while implementing “credible fiscal plans.”
They also concurred on the view that monetary policy should support recovery and be directed at domestic price stability, at the same time agreeing that urgent and specific measures are needed to create “quality jobs” for the young.
On Japan’s economy, the G-8 leaders said Abe’s administration needs to define a “credible medium-term fiscal plan” while acknowledging that the country’s growth is supported by fiscal stimulus, bold monetary policy and a — rather vague — growth strategy. Together, they make up the “three arrows” of Abenomics.
During the summit’s first session, which focused on global economic issues, Abe expressed his determination to spark economic growth at home so that Japan will in turn boost the global economy. He told the other leaders he aims to integrate the Japanese and world economies by helping his nation’s firms expand into overseas markets and by promoting foreign investment in Japan, a Japanese official said.
Abe meanwhile made clear his intention to not just raise the consumption tax to 8 percent next April from the current 5 percent but to hike it again to 10 percent in October 2015, providing the economic environment at the time allows for such a move, the official said.
Abe explained his goal of reducing the ratio of Japan’s public debt to gross domestic product in a stable manner, stressing the importance of balancing fiscal rehabilitation and economic growth.
During the same session, one G-8 leader pointedly expressed concerns about the monetary easing steps implemented by the Bank of Japan and the U.S. Federal Reserve, asking what the “exit strategies” of Tokyo and Washington are and pointing to the danger of the competitive currency devaluation they could set off, the official said, without identifying the speaker.
Later Monday, German Chancellor Angela Merkel met with Abe and apparently warned against his credit-easing policy, which has caused the yen to sharply depreciate against major currencies this year. Merkel raised the issue of foreign exchange and indicated current circumstances surrounding foreign exchange rates could harm the global competitiveness of countries offering cheap labor, a separate Japanese official told reporters.