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Credit crunch tops Japan G7 talks G7 issues global economy warning
(about 3 hours later)
Finance ministers from the G7 group of wealthy nations have begun a day of talks in Tokyo. The global economy could deteriorate further in the wake of the global credit crunch, a meeting of the G7 group of wealthy nations has warned.
They are discussing the fallout from the global credit crunch, and how best to prevent a similar crisis developing again. But the group pledged to act individually and together to promote stability and growth.
But the meeting is not expected to produce unified policy changes. It also urged banks to disclose all their losses and bolster their balance sheets to help stabilise markets.
Japan hopes the talks will help calm regional stock markets rattled by the rippling effect of the problems in the US mortgage market. The group's statement came after a day-long meeting of ministers and central bank governors in Tokyo.
The US treasury secretary insisted ahead of the talks that his country's economy would continue to grow, though at a slower pace than before. "In all our economies, to varying degrees, growth is expected to slow somewhat in the short term," it said.
Japan has called for mechanisms that would force banks and financial institutions to be more transparent in their dealings. As financial officials, we need to respond resolutely and proactively to the turmoil Hank PaulsonUS Treasury Secretary
The first thing is that conditions in different countries are not the same Alistair Darling UK Finance Minister The G7 nations said that continuing risks included further problems for the US housing market, tighter credit, high commodity prices and rising inflation.
Britain agrees, and Finance Minister Alistair Darling says the group needs to agree methods to ensure that in future they get more warning when problems emerge. "Going forward, we will continue to watch developments closely and continue to take appropriate actions, individually and collectively, in order to secure stability and growth in our economies," they said.
Mr Darling downplayed the prospects of agreement over a stimulus package to try to boost global demand. They also called on oil producers to increase output and on China to let its currency appreciate faster.
"The first thing is that conditions in different countries are not the same," he said. US woes
While steep interest rate cuts and government spending might be the right move in the US, he said "other countries are not in the same position". US Treasury Secretary Hank Paulson said current financial turmoil was "serious and persisting".
Each had to reach its own conclusions as to what was needed. "As the financial markets recover from this period of stress, as of course they will, we should expect continued volatility as risk is repriced," he said.
Europe and Japan appear to have little room for manoeuvre, says the BBC's Chris Hogg in Tokyo. "As financial officials, we need to respond resolutely and proactively to the turmoil."
There are strong inflationary pressures to deal with and Japan in particular is saddled with huge amounts of public debt. He did not suggest specific measures for G7 partners to take.
Green fund Mr Paulson said he was confident in the long-term health of the US economy and expected it to grow this year, but also said a recent stimulus package had been crucial.
Japan, the US and the UK also plan to propose a new fund, administered by the World Bank, to help poorer countries adopt cleaner technologies to help combat global warming. Global trends
The fund will support publicly and privately financed projects that use technology that helps cut greenhouse gas emissions, increases efficiency and saves energy.
Ministers from the three countries say they will pledge "quite substantial sums" and will invite others to contribute.
Haruhiko Kuroda, the head of the Asian Development Bank, on Friday warned that the US economic downturn would take its toll on emerging Asian economies.
But he stressed that rising inflation in the region is currently more of a threat than worries about a slowdown.
Last week, the International Monetary Fund cut its global economic growth forecast from 4.4% to 4.1%, the lowest in five years.
Following aggressive interest rate cuts in the US and the approval of a bill giving Americans tax rebates worth $167bn (£86bn), the focus will be on whether other industrialised nations will implement stimulus plans of their own.
Different conditions
The G7 countries include the US, Japan, the UK, Canada, France, Germany and Italy, all of which are experiencing a significant slowdown in growth.The G7 countries include the US, Japan, the UK, Canada, France, Germany and Italy, all of which are experiencing a significant slowdown in growth.
Meanwhile, China, India and other East and South East Asian economies have experienced break-neck growth over the past few years as current account surpluses and foreign exchange reserves have ballooned.
G7 members hope the Tokyo meeting will calm global credit fearsG7 members hope the Tokyo meeting will calm global credit fears
Meanwhile, China, India and other East and South East Asian economies have experienced break-neck growth over the past few years as current account surpluses and foreign exchange reserves have ballooned.
But as the global credit crisis and US housing slump has brought the world's largest economy to its knees, concerns have persisted that these problems would spread to Asia, which is heavily reliant on US imports of its products and foreign investment for growth.But as the global credit crisis and US housing slump has brought the world's largest economy to its knees, concerns have persisted that these problems would spread to Asia, which is heavily reliant on US imports of its products and foreign investment for growth.
Meanwhile, perceptions have changed as to whether the European Central Bank (ECB) is likely to reduce interest rates from their current level of 4% to help boost growth in the eurozone. On Friday, Haruhiko Kuroda, the head of the Asian Development Bank, warned that the US economic downturn would take its toll on emerging Asian economies.
But he stressed that rising inflation in the region is currently more of a threat than worries about a slowdown.
More rate cuts?
Last week, the International Monetary Fund cut its global economic growth forecast from 4.4% to 4.1%, the lowest in five years.
Following aggressive interest rate cuts in the US and the approval of a bill giving Americans tax rebates worth $167bn (£86bn), the focus has been on whether other industrialised nations would implement stimulus plans of their own.
Perceptions have changed as to whether the European Central Bank (ECB) is likely to reduce interest rates from their current level of 4% to help boost growth in the euro zone.
ECB President Jean-Claude Trichet has previously maintained a tough line on controlling inflation in the 15-nation bloc that uses the euro despite clear signs that a frail recovery was running out of steam.ECB President Jean-Claude Trichet has previously maintained a tough line on controlling inflation in the 15-nation bloc that uses the euro despite clear signs that a frail recovery was running out of steam.
But following an ECB decision to keep rates on hold on Thursday, he appeared to shift focus, stressing the risks to the global economy in his press conference.But following an ECB decision to keep rates on hold on Thursday, he appeared to shift focus, stressing the risks to the global economy in his press conference.
This raised hopes that eurozone interest rates could be cut later this year. This raised hopes that euro zone interest rates could be cut later this year.