The G7 financial leaders will be meeting in Japan’s Sendai this weekend to discuss currency volatility and methods required in revitalizing leading economies. Differences in approaches are expected and investors will be watching for signs of tension between Japanese and U.S. powers.
The two countries have sparred over the dollar-yen exchange rate in the months since the Japanese currency began a prolonged rise against the dollar. The yen has lost nearly 9% of its value relative to the dollar since the beginning of the year.
Attending the meeting at the famous hot spring resort Sendai are financial leaders including US Treasury Secretary Jacob Lew, European Central Bank president Mario Draghi, and IMF chief Christine Lagarde.
Japan Pressuring Leaders
Japan will be putting pressure on the participating countries to continue fiscal stimulus in their respective economies as a way of aligning global growth. The other G7 nations, including the United States and Germany see such moves as counterproductive.
Japanese Finance Minister Taro Aso spoke publicly last week about the continuing disagreement between U.S. and Japanese policy makers over whether the rise in the yen calls for an intervention. According to Aso, Tokyo won’t hesitate to intercede in the market if the currency continued to drop and that the Treasury Department’s decision to put Japan on a currency manipulation monitoring list “won’t constrain” the country’s currency policy.
Most leaders attending the G7 disagree with the idea of manipulating currencies. According to French Finance Minister Michel Sapin, “Today we are in a cooperation phase, and not in an intervention or a currency war phase.”
The meeting of finance ministers precedes the G7 leaders’ summit in Ise-Shima on May 27.