G-7 vows to apply ‘maximum economic pressure’ on North Korea over missile threat

by

Kyodo

Group of Seven finance chiefs on Thursday pledged to apply “maximum economic pressure” on North Korea over the “grave” threat posed by its missile and nuclear weapons development, a senior Japanese official said.

The G-7 finance ministers and central bank governors affirmed close coordination in blocking North Korea’s attempts to evade U.N. sanctions, Masatsugu Asakawa, vice finance minister for international affairs, told reporters after a meeting in Washington.

In separate talks of the broader Group of 20 major developed and emerging economies, Bank of Japan Gov. Haruhiko Kuroda explained Prime Minister Shinzo Abe’s plan to put off the country’s goal of achieving a primary balance surplus in fiscal 2020.

Abe’s campaign pledge for the Oct. 22 general election to boost spending on child care and education would make it virtually impossible for the government to achieve the goal, but Japan remains committed to restoring its debt-ridden finances, Kuroda was quoted by Asakawa as telling his G-20 counterparts.

“We shared the recognition that we need to apply maximum economic pressure on North Korea by blocking the sources of North Korea’s income and preventing the country from abusing the international financial system,” Asakawa said on the G-7 gathering.

Measures include blocking financial trade that would promote North Korea’s attempts to evade U.N. sanctions, said Asakawa, who attended the G-7 and G-20 meetings in lieu of Finance Minister Taro Aso.

“North Korea’s development of weapons of mass destruction and ballistic missiles poses a grave threat to international peace and security,” the official said.

He said it is rare for the G-7 finance chiefs to make public the fact that they met on the sidelines of a G-20 financial meeting, in what he said was the G-7’s resolve to step up pressure to rein in North Korea.

The meeting was held under the leadership of Italy, which holds this year’s presidency of the G-7. The group is made up of Britain, Canada, France, Germany, Italy, Japan and the United States.

In the G-20 meeting, which runs to Friday, Kuroda explained Abe’s plan to spend part of the revenues from a planned increase in the consumption tax to 10 percent from 8 percent in 2019 to expand support for households with children and ease the financial burdens of preschool and higher education.

Such a shift would reduce resources intended to restore the nation’s fiscal health, the worst among major advanced economies.

The G-20 shared the view that a rollback in monetary easing in the United States and Europe could pose a downside risk to the otherwise sound world economy, according to Asakawa.

Earlier on Thursday, Kuroda expressed optimism about the world economy, but cited U.S. economic and monetary policy and geopolitical tensions as risk factors to global growth.

“Although there are risks, including geopolitical ones, the standard scenario is that the world economy will continue steady growth with some acceleration,” the BOJ chief told reporters at a Washington hotel.

Citing steady growth in the United States, Europe and emerging economies including China, Kuroda said the world economy is posting solid growth, but that “various uncertainties exist.”

Although Kuroda did not elaborate on U.S. economic and monetary policy risk factors, he was apparently referring to the outlook for planned tax cuts and the pace of U.S. interest rate increases, which could trigger reversals in capital and investment flows to emerging economies.

His citing of “geopolitical risks” was apparently a reference to North Korea’s missile and nuclear weapons development programs.

Kuroda said the Japanese economy is “expanding moderately” and in “a very favorable condition,” given a forward-looking cycle of income turning into spending.

The International Monetary Fund has forecast the world economy will grow 3.6 percent in 2017 and 3.7 percent in 2018, up 0.1 percentage point, respectively, from its estimate in July, as the “broad-based” global recovery has gathered steam.

The G-20 groups the G-7 plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union.