Finance Minister Kiichi Miyazawa and his counterparts from the Group of Seven economic powers will meet Saturday in Fukuoka and discuss the policy implications of information technology, international financial system reforms and debt-relief programs for poor countries.
The G7 finance chiefs will renew their commitment to international efforts to crack down on money laundering, tax havens and other potential threats to the global financial system.
The discussions at the Fukuoka meeting and a subsequent Group of Eight foreign ministers’ meeting on July 12 and 13 in Miyazaki will culminate in the July 21-23 G8 summit in Okinawa.
The G7 consists of Britain, Canada, France, Germany, Italy, Japan and the United States. The G8 is the G7 plus Russia, which is considered politically important.
The finance ministers will submit four sets of reports approved at the Fukuoka meeting to the state leaders, who in turn will incorporate their contents into the Okinawa summit.
Besides the four main issues, the finance chiefs will also review global economic conditions, including the state of Japan’s budding recovery, which is still clouded by sluggish consumption and high unemployment.
“I don’t think the talks will be very controversial,” Finance Minister Kiichi Miyazawa said Wednesday in a news conference. “We will probably not discuss foreign exchange (rates) in detail because central bank governors will not be present.”
Russian Finance Minister Alexey Kudrin will take part in the G7 meeting when Russia’s economic growth and structural problems are discussed.
The biggest issue on the Fukuoka agenda is the IT revolution, which is also a key theme of the Okinawa summit. The finance ministers will focus on the impact of the IT revolution on macroeconomic conditions, financial business and taxation.
The IT revolution, particularly the growth of the Internet, has been raising productivity through cost reductions and also creating new kinds of services, such as online shopping.
Haruhiko Kuroda, vice finance minister for international affairs, recently said that because the revolution is expanding both supply and demand, “By making the best use of IT, countries will be able to achieve stronger, more balanced growth.”
But at the same time, there are risks of economic imbalance, such as overvaluation of Internet-related stocks. The finance chiefs are expected to express caution about the risks and agree on the increasing need for sound macroeconomic policy to maximize the benefits of the IT revolution.
They will also discuss regulation and supervision to cope with rapidly evolving financial services, such as online banking and online brokering. Making international rules to protect consumers without suffocating new types of business will be an issue.
Taxation on electronic commerce may be a topic of controversy. At present, cross-border online purchases of tangible goods are taxed at customs, while purchases of digital data, such as movies and music, are not.
European countries and Japan support taxing online sales of digital information downloaded via the Internet. But the U.S. is against such a move, because it believes e-commerce is a strength for its economy and does not want to stunt its growth.
The Paris-based Organization for Economic Cooperation and Development has been studying ways to collect sales taxes on digital data. The finance ministers are expected to follow up OECD discussions, confirming the principles of neutrality and fairness in taxation.
Another focus of the Fukuoka meeting is reforms for international financial systems. This wide-ranging topic has been examined following the financial crises that hit Asia, Russia and Latin America in 1997 and 1998.
Particularly, reforming the governance and lending mechanisms of the Washington-based International Monetary Fund will be a main issue. Japan has proposed redistribution of the voting power and quota share within the IMF, claiming Asian countries have an unfair share despite their economic strength.
Ways to make the IMF’s Contingent Credit Line easier to use will also be discussed. The CCL, a lending mechanism to prevent financial panic, has not been used since its creation in April 1999. Tokyo has proposed lowering the cost of borrowing and eliminating the commitment fee.
On the debt-relief initiative for heavily indebted poor countries, the finance ministers are expected to discuss how to balance speedy application of the plans to eligible countries and secure the proper use of funds.
The G7 countries agreed at last year’s summit in Cologne, Germany, that they would waive all their official development assistance loans to the HIPCs. They later decided to waive non-ODA loans as well.
To receive the debt relief, HIPCs must draw up strict programs for poverty reduction because some African countries have reportedly used funds, which were made available after debt reduction, for military purposes in the past.
IT talk draws leaders
Prime Minister Yoshiro Mori and some other Group of Eight leaders will participate in an international conference on information technology in Tokyo on July 19 before the July 21-23 Okinawa summit, according to conference sources.
The conference, to be sponsored by the Geneva-based World Economic Forum, will gather top executives of leading IT-related firms, including Sony Corp., Toshiba Corp., Sun Microsystems Inc. and Cisco Systems Inc., the sources said Tuesday.
Mori highlighted the importance he places on fostering IT as a policy target by naming a Cabinet member in charge of IT promotion. IT is also to be a key topic of discussion at the G8 summit.
Mori will deliver a speech at the conference, after which he will be given a set of proposals for promoting IT for the summit drafted mainly by Sony Chairman Nobuyuki Idei and Toshiba Chairman Taizo Nishimuro, the sources added.
The agenda for the conference has not been set, but sources said participants would discuss the problems of the so-called digital divide, as well as the establishment of international rules for cross-border commercial transactions using the Internet and the need for enhanced antihacking measures.
The World Economic Forum is an independent, impartial, nonprofit organization known for sponsoring a high-profile conference every year in Davos, a Swiss ski resort near Zurich.