Staff writer Policy coordination over the yen’s rise against the dollar will be the biggest issue for Japan at Saturday’s financial meeting of the Group of Seven industrial countries in Tokyo. Finance Minister Kiichi Miyazawa hopes the G-7 will share Japan’s concern about the yen’s appreciation; the proof will be in a joint statement to be issued after the meeting. In the past, the United States and Europe have expressed different opinions about the yen, and now the currency markets are holding their breath to see whether the statement will mention the yen’s appreciation. Aside from the currency issue, Miyazawa, the host of the meeting, is not expected to face a rough ride as the world economy has improved since the last G-7 gathering in Washington in September. “At this rate, I think this G-7 meeting will be one without much confrontation,” Miyazawa said last week. A European government official was also optimistic, saying there will be “no stress” compared with the previous meeting. This will be the first G-7 meeting of finance ministers and central bank governors to be held in Japan. It will also serve as a preliminary for the Group of Eight summit in Okinawa in July. Besides the still-fragile economy and ongoing corporate restructuring in Japan, likely topics include the robust U.S. economy, which some consider overheated, and the improving economies of Europe. The recovery of emerging markets — Asian and Latin American countries hit by financial crises since 1997 — and their remaining problems will also be taken up. The financial chiefs will also review the international financial systems for crisis prevention and explore ways to expedite the debt-relief initiative for poor countries. The G-7 members are Britain, Canada, France, Germany, Italy, Japan and the United States. The G-7 plus Russia make up the G-8. Michel Camdessus, managing director of the International Monetary Fund, will join the discussion about the world economy. Camdessus plans to resign in mid-February. Currently, Caio Koch-Weser, German deputy finance minister, is thought to be the leading candidate to succeed him, but support from other countries is far from solid. Japan is pushing Eisuke Sakakibara, former vice finance minister for international Japan’s priority at the meeting is to gain cooperation in preventing an excessive appreciation of the yen. Miyazawa has repeatedly expressed a strong determination to prevent a rapid rise of the yen, saying it will delay economic recovery. A stronger yen can hurt Japanese exports by raising their prices abroad and thus make them less competitive. But Japan’s G-7 counterparts see things differently. The U.S. does not want Japan to seek a weaker yen and export-led recovery. And, as Miyazawa admitted, European countries appear content with recent foreign exchange The joint statement issued after the September meeting said the G-7 “shared Japan’s concern about the potential impact of the yen’s rise on the Japanese economy and the world economy.” Before that gathering, the yen had been rapidly surging toward 100 to the dollar, reflecting market expectations of an economic recovery in Japan. But recently, the yen-dollar rate has been stable at around 105 yen. Japan stepped into the currency market to sell yen for dollars on Jan. 4. when the yen-dollar rate neared 100 yen. The 100 yen level is the current line of defense for Japan, as Miyazawa uncharacteristically pointed out on Jan. 7. He recently said currency movements after the G-7 meeting must be carefully watched, noting the markets usually become volatile during such times. At the meeting, Miyazawa will also explain the continuing expansionary spending by the government, including the proposed 85 trillion yen fiscal 2000 budget, which requires 33 trillion yen in bond issues. He will probably then express hope that the economy will begin to recover by summer. The fact that Japan’s fiscal deficit and government debt are the worst in the G-7, however, could be a source of concern for the other countries. Bank of Japan Gov. Masaru Hayami will stress that the central bank will continue its “zero-interest rate” policy aimed to shore up the economy. The bank’s monetary policy is expected to draw attention, though not as much as at the September meeting. Most participants will be keen to exchange opinions regarding the long inflation-free boom that has been pushing the U.S. economy. The advance is being led by technological innovation, which has given rise to an insatiable appetite for information technology issues on U.S. bourses. There is now growing concern that with astronomical price-to-earnings ratios on many Internet-related stocks, the boom has become a U.S. Federal Reserve Board Chairman Alan Greenspan last week indicated the need to raise interest rates to cool down the economic temperature. Russian Finance Minister Mikhail Kasyanov, deputy of the acting president Vladimir Putin, will also join part of the G-7 discussion and explain the current situation of the Russian economy. Other participants include Willem Duisenberg, governor of the European Central Bank, and Joaquim Pina Moura, Portuguese finance minister and representative of the 11 European countries that share the n. Before the G-7 meeting starts at noon Saturday, Miyazawa will hold bilateral talks with U.S. Treasury Secretary Lawrence Summers, German Finance Minister Hans Eichel and French Finance Minister Christian Sautter.
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