Japan should explain how it will guard against external effects from its deflation-fighting efforts, the European Union said in a planning document for a July 19-20 meeting of Group of 20 finance ministers in Moscow.
“We expect that Japan will put in place a credible medium-term fiscal consolidation plan that addresses its possible spillover effects on the domestic and foreign financial systems from its policy program to end deflation,” according to the July 3 EU document obtained by Bloomberg News.
The G-20 ministers will consider a draft action plan to promote economic growth that could include the EU’s efforts to integrate its financial system and repair credit channels, the document stated. The EU said it will encourage China to accelerate planned structural reforms and make more use of market-determined exchange rates.
The EU said in the document that the “absence of an agreement on a credible medium-term fiscal consolidation plan in the U.S. continues to pose a downside risk to the global recovery.” The U.S. “should make progress in addressing the medium- and long-term fiscal challenges it is facing as well as deal with the debt-ceiling issue,” according to the EU.
In Japan, Prime Minister Shinzo Abe’s plan to reflate the Japanese economy by expanding stimulus measures and weakening the yen has prompted the currency’s biggest losses since 1996.
EU finance ministers will discuss planning for the G-20 when they meet in Brussels tomorrow. Euro-area ministers are gathering today to discuss the currency area’s economic outlook and the next group of aid payments to Greece.
The EU planning document for the G-20 says “policy measures that help rotate global demand remain essential.” It also calls for a “new narrative” on global financial regulation and for a “common, global approach” on tax issues such as companies shifting their profits across borders.