Japan's Abe points to 2008 crisis as G-7 leaders debate global risk

Group of Seven leaders pose for the family photo during the first day of the G7 summit meetings in Ise city on May 26, 2016.
Group of Seven leaders pose for the family photo during the first day of the G7 summit meetings in Ise city on May 26, 2016. PHOTO: AFP

ISE-SHIMA (Reuters) - Group of Seven leaders voiced concern about emerging economies on Thursday (May 26) as their host, Japanese Prime Minister Shinzo Abe, made a pointed comparison to the global financial crisis eight years ago.

He said Japan will push ahead with its growth agenda. “Based on these Ise-Shima economic initiatives, we are going to have the G7 promote the Abenomics’ three-arrow policy” of bold monetary policy, flexible fiscal spending and structural reforms, Abe told reporters on the sidelines of the first day of a two-day summit in Ise-Shima, central Japan.

The G-7 leaders agreed on the need for flexible spending to spur world growth but the timing and amount depended on each country, Deputy Chief Cabinet Secretary Hiroshige Seko told reporters, adding some countries saw no need for such spending.

Britain and Germany have been resisting calls for fiscal stimulus.

"G-7 leaders voiced the view that emerging economies are in a severe situation, although there were views that the current economic situation is not a crisis," Seko said after the first day of a two-day G-7 summit in Ise-Shima, central Japan.

 
 

Abe presented data showing global commodities prices fell 55 per cent from June 2014 to January 2016, the same margin as from July 2008 to February 2009, after the Lehman collapse.

Lehman had been Wall Street's fourth-largest investment bank when it filed for Chapter 11 protection on Sept 15, 2008, making its bankruptcy by far the biggest in US history. Its failure triggered the global financial crisis.

Abe hopes, some political insiders say, to use a G-7 statement on the global economy as cover for a domestic fiscal package including the possible delay of a rise in the nation's sales tax to 10 per cent from 8 per cent planned for next April.

The G-7 leaders are also expected to reaffirm their previous commitment to stability in the foreign exchange market.

European Council President Donald Tusk said earlier he would seek G-7 support for more global aid for refugees. A flow of migrants from Syria and elsewhere to Europe has confronted the continent with its biggest refugee crisis since World War Two.

"If we (G7) do not take the lead in managing this crisis, nobody would," Tusk told reporters.

MARITIME SECURITY

Other summit topics include terrorism, cyber security and maritime security, especially China's increasing assertiveness in the East and South China Seas, where Beijing has territorial disputes with Japan and several South-east Asian nations.

At a news conference late on Wednesday, Abe said Japan welcomed China's peaceful rise while repeating Tokyo's opposition to acts that try to change the status quo by force and urging respect of the rule of law - principles expected to be mentioned in a statement after the summit.

 
 

Asked if a G-7 summit was the right place to discuss the South China Sea, Chinese Foreign Minister Wang Yi told a briefing in Beijing it was up to the G-7 to decide.

"But we believe that no matter what the topic is, they should all adopt impartial and fair positions, and not apply double standards or strike alliances, and especially not take actions to escalate or provoke regional tensions," he said.

Summit pageantry began when Abe escorted G-7 leaders to the Shinto religion's holiest site, greeting US President Barack Obama and other G-7 partners one-by-one at Ise Grand Shrine in central Japan, dedicated to sun goddess Amaterasu Omikami, mythical ancestress of the emperor.

Led by a white-robed priest, each leader walked across a bridge, took part in a tree-planting ritual, strolled through the expansive grounds and posed for a group photo.

Abe has said he hopes the shrine visit will provide an insight to the heart of Japanese culture. Critics say he's catering to a conservative base that wants to put religion back in politics and revive traditional values.

On Wednesday night, Abe met Obama for talks dominated by the arrest of a US military base civilian worker in connection with the killing of a young woman on Japan's southern Okinawa island, reluctant host to the bulk of the US military in Japan.

The attack has marred Obama's hopes of keeping his Japan trip strictly focused on his visit on Friday to Hiroshima, site of the world's first atomic bombing, to highlight reconciliation between the two former World War II foes and his nuclear anti-proliferation agenda.

The G-7 groups Britain, Canada, France, Germany, Italy, Japan and the United States.