Japan hopes to win global support for its fight against deflation when finance chiefs from the Group of Seven major economic powers gather in Paris over the weekend, but financial experts believe that Tokyo will be hard-pressed in achieving its goal.

As the two-day meeting of the G7 nations will likely center on the adverse economic effects of a possible U.S.-led war against Iraq, Finance Minister Masajuro Shiokawa and Bank of Japan Gov. Masaru Hayami are expected to try to draw attention to Japan’s antideflation efforts on the sidelines of the discussions, according to financial experts.

The experts said Shiokawa and Hayami will probably try to spotlight Tokyo’s plight by pointing out that all countries face a risk of deflation amid the uncertain geopolitical climate and global economic slowdown.

The G7 comprises Britain, Canada, France, Germany, Italy, Japan and the United States.

Japan, mired in economic stagnation for more than a decade, seeks global cooperation to avoid any further deterioration of the world economy, which would deal a serious blow to the nation’s export-driven economy, they said.

But these efforts are unlikely to win support from the other member nations, which each have economic problems of differing degrees of their own to deal with, they said.

“I don’t think Japan’s view will be fully supported by member countries,” said Taisuke Tanaka, chief macro strategist at Credit Suisse First Boston Securities (Japan) Ltd. “The financial authorities themselves may not expect such support, either.”

Further credit easing by the U.S. and Europe would resuscitate global price trends and overall economic health, thus helping Japan to combat its ongoing problem with deflation. Japan has virtually no more room for credit easing.

But neither the U.S. nor Europe seem interested in Japan’s calls, mainly because both still have room for further credit easing and can manage their domestic economic problems on their own.

“There is a very wide gap between the Japanese government and U.S. and European financial authorities over the problem of deflation,” according to a report by Yasunari Ueno, chief market economist at Mizuho Securities Co.

But if Japan’s financial authorities win some cooperation from G7 financial leaders, Tanaka said, it could in turn pressure the BOJ, which is reluctant to introduce new aggressive monetary steps to create inflation within a certain time frame.

Some financial experts have meanwhile speculated that Japan may try to persuade the member nations to jointly employ reflation policy. Reflation policy is an economic-stimulation measure that involves increasing currency supply while simultaneously staving off inflation.

The speculation is based on an article by Haruhiko Kuroda, former vice finance minister for international affairs, published in a Japanese financial daily on Feb. 13. “The global economy in 2003 is facing two large risks: global deflation and a war against Iraq,” Kuroda said, adding that G7 nations must take appropriate steps to deal with these risks.

Each country and region should take proper monetary steps, he said, adding that Japan’s main priority is to solve deflation.

Meanwhile, Shiokawa has maintained that the upcoming G7 gathering will focus on the global economic outlook rather than the global economic impact of the likely war on Iraq, and senior officials of the Finance Ministry believe the G7 meeting will provide member nations with an opportunity to discuss the international economy.

Member nations hold differing stances over the plan to attack Iraq, with the U.S. and Britain hoping to move forward, and France and Germany steadfastly opposing any such move.

“Uncertainty over the future is high, which has a negative impact on corporate investment and consumers’ sentiment,” a top finance ministry official said on condition of anonymity. “Member countries will confirm with each other the importance of launching flexible measures at an appropriate time and in a proper manner.”

The upcoming discussion will naturally include oil prices, which are expected to skyrocket if the war on Iraq proceeds, while foreign exchange policy will not be a focus of the G7 meeting, he said.

Asked whether the yen’s movement against the dollar will be a key topic at a bilateral meeting between U.S. Treasury Secretary John Snow, who will make a debut at the G7 meeting, Shiokawa said, “No, it will not.”

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