After meeting in Washington last week, G7 finance ministers and central bankers released a statement saying that while the G7 nations are experiencing a deep economic downturn and financial stress, recent data suggest that the pace of decline in the G7 economies has slowed and some signs of stabilization are emerging.

For the first time since last fall, G7 financial leaders have painted a somewhat bright prospect, saying that economic activities should begin to recover later this year. Their words must have given a sense of relief to markets.

Nevertheless, as U.S. Treasury Secretary Timothy Geithner said after the meeting, both advanced and emerging nations “should not let their guard down but keep up their work to lift their economies out of recession.” In fact, the G7 statement emphasized that downside risks persist.

Saying that the financial crisis has led the global economy into a recessionary phase, the International Monetary Fund has lowered its projection of world economic growth for 2009 to minus 1.3 percent — almost 2 percentage points less than originally forecast. The Japanese economy is forecast to shrink 6.2 percent, much worse than America’s 2.8 percent shrinkage.

The Japanese government Monday revised downward its economic outlook for 2009. Japan’s gross domestic product is predicted to shrink by 3.3 percent in real terms, worse than the zero growth predicted in December.

It also fears deflationary pressure. The consumer prices general index is expected to drop a record 1.3 percent, worse than the earlier anticipated minus 0.4 percent.

Although the IMF expects the world economy to grow a modest 1.9 percent in 2010, problems remain. The IMF says that from 2007 to 2010 losses suffered by financial institutions will grow to $4 trillion. The total picture of bad loans held by U.S. financial institutions is still unclear. The U.S. car industry is struggling to survive. It is important for the international community to boost cooperation while steadily implementing economic stimulus measures and regulatory reform.

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