Japan says G-20 summit to debate trade including WTO reform

The skyline of the Japanese city of Osaka, which will be hosting the G-20 summit next week.
The skyline of the Japanese city of Osaka, which will be hosting the G-20 summit next week.ST PHOTO: WALTER SIM

TOKYO (REUTERS) - Substantial discussions on trade, including reform of the World Trade Organisation (WTO), will likely take place at a summit of Group of 20 (G-20) major economies next week in Osaka, a senior Japanese Finance Ministry official said on Wednesday (June 19).

Japan, which chairs this year’s G-20 gatherings, will take a neutral stance in the US-China trade row and urge countries to resolve tensions with a multilateral framework, said Mr Masatsugu Asakawa, Vice-Finance Minister for International Affairs.

“With regard to differences (on trade) between the United States and China, Japan of course won’t take sides. We will also not take any steps that go against WTO rules,” said Mr Asakawa, who oversaw the G-20 finance leaders’ gathering earlier this month.

“Japan will continue to take a multilateral approach in promoting free trade,” he told a news conference.

China and the United States, the world’s two largest economies, are in the middle of a costly trade war that has pressured financial markets and damaged the world economy.

Markets are focused on whether US President Donald Trump and his Chinese counterpart Xi Jinping can narrow their differences when they sit down at the G-20 summit.

The bitter trade war has forced the International Monetary Fund to cut its global growth forecast and overshadowed the G-20 meetings that conclude with the Osaka summit on June 28-29.

At a finance leaders' gathering, the G-20 countries issued a communique warning that trade and geopolitical tensions have intensified and that policymakers stood ready to take further action against such risks.

“The macro-economic impact (of the trade tensions) is an issue of concern,” Mr Asakawa said, conceding it took considerable time for G-20 finance ministers and central bank heads to agree on their communique’s language on trade.

More concrete discussions on trade policy will take place at the G-20 Osaka summit, he added.

The row over trade appeared to spread to currency policy when Mr Trump criticised European Central Bank President Mario Draghi’s dovish comments as aimed at weakening the euro to give the region’s exports an unfair trade advantage.

Mr Asakawa rebuffed the view that the Bank of Japan’s (BOJ) massive stimulus programme could also provoke the ire of Mr Trump.

He also said the G-20 shared an understanding that members would accept any exchange-rate moves driven by ultra-easy monetary policies as long as the measures are not directly aimed at manipulating currencies.

“The BOJ’s ultra-easy policy is aimed at beating deflation, not at manipulating exchange rates. That’s understood widely among the G-20 economies,” he said.

Fears of the widening fallout from the trade war have heightened market expectations that the US Federal Reserve will start cutting interest rates this year. Mr Draghi said on Tuesday that the European Central Bank will ease again if inflation fails to accelerate.

The dovish tone of other central banks have piled pressure on the BOJ, though many analysts expect it to keep policy steady at least at this week’s rate review.