Against a backdrop of fears of a bank-led global financial crisis, the Group of Seven finance ministers and central bank governors meeting, which starts Thursday, is expected to focus on strengthening the financial system.
Ahead of the G7 leaders summit in Hiroshima next week, the gathering in the city of Niigata will also deal with a number of issues such as regulation of crypto currencies and supply chain resilience.
The ministers and central bank chiefs in attendance will discuss plans to combat bank runs, according to the Finance Ministry, with participants likely looking to project a sense of calm and preparedness.
Last month, after meeting in Washington, the G7 finance ministers and central bank governors released a statement reaffirming that the financial system is “resilient, supported by relevant authorities’ prompt responses as well as the financial regulatory reforms implemented after the 2008 global financial crisis.”
Yet due to the collapse of First Republic Bank earlier this month, which further fueled worries set off by the failure of Silicon Valley Bank in March, the G7 ministers and bank governors are likely to try and build consensus around key issues relating to the global financial system.
Referencing the recent bank runs seen in the U.S., Japanese Finance Minister Shunichi Suzuki, who will chair the gathering, said Tuesday that "the environment surrounding finance has changed dramatically with the emergence of social media and internet banking,” and that how to respond to these challenges was up for discussion at the event.
While regulators and officials have consistently sought to maintain a sense of calm and provide assurances, economists have warned of a brewing global financial crisis in the aftermath of the U.S. bank runs.
The meeting will also discuss issues related to crypto assets, as calls for stricter regulations have been growing in light of the failure last November of FTX — then the world’s second-largest crypto exchange.
A senior Finance Ministry official stressed the need to beef up measures against crypto laundering and terrorist financing, as North Korea is believed to be funding the development of weapons with stolen crypto assets.
However, the official said it is unclear whether the joint statement to be released at the end of the Niigata meeting will include a mention of crypto.
The U.S. debt ceiling may also be discussed, Masato Kanda, Japan's vice minister of finance for international affairs, said recently.
U.S. President Joe Biden has been focused on debt ceiling talks, amid fears the country may default on its payment obligations as early as next month due to disagreements between the White House and Congress on raising the limit. On Wednesday, Biden said that while he was “still committed” to attending the G7, “it is possible but not likely” that he would miss the Hiroshima summit in order to focus on resolving the debt ceiling issue.
U.S. Secretary of the Treasury Janet Yellen has reportedly been calling business and financial leaders in the U.S. to warn them of the impacts.
Yellen will be attending the Niigata summit and will also hold a bilateral meeting with Suzuki.
In addition to headline-dominating issues, the closed-door meeting will also examine supply chains, according to sources. Strengthening these for green energy products will be one of the primary topics.
The G7 finance leaders are keen to have more developing nations play key roles in these supply chains, the sources added. Japan, as the chair, aims to persuade G7 members to take concrete steps to launch a partnership promoting these efforts.
In February 2023, an outline of Japan’s G7 presidency policies was released, indicating a focus on issues including strengthening global economic resilience, addressing debt vulnerabilities in low- and middle-income countries, enhancing support for developing countries, and tackling climate change and sustainability.
Information from Reuters added
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