Not much was decided at the 2-day G7 meeting of finance ministers and central bank governors in Sendai over the weekend. And this came as no surprise. The dispute between Japan’s manipulation of the yen and the U.S. objection to the intervention set the mood of the gathering even before the opening session and set the stage for the remainder of the talks which basically went nowhere.
The G7 leaders called for a mix of monetary, fiscal and structural policies to boost demand but left it to each country to decide its own policy priorities –a "go-your-own-way" response to the controversy. This disappointed Japan’s call for more aggressive joint fiscal action.
Germany was one of the G7 countries that did not respond to requests for big fiscal spending but one government official called for structural reforms as a key tool to help support the global economy.
After meeting with his Japanese counterpart on Saturday, U.S. Treasury Secretary Jack Lew told reporters that he did not consider current yen moves as "disorderly."
"It's important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don't surprise each other," he said. "It's a pretty high bar to have disorderly (currency) conditions.”
At the same time, Japanese Finance Minister Taro Aso said that it was only natural for countries to have differences in how they see exchange-rate moves but the meeting with Lew did not stop him from issuing verbal warnings to markets against pushing up the yen too much.