To say the least, there were practically no results to be seen at the G-20 Finance Ministers and Central Bank Governors meeting that drew to a close on Sept. 21.
The joint statement indicated that the world economy is facing growth that is “uneven,” and “persistent weaknesses in demand.” The problem is that there was no clear demonstration of policy coordination between each country and region geared toward continuous growth in the world economy.
While the U.S. shifted toward positive growth for 4 to 6 months, the real economic growth rate in the eurozone was zero, and Japan experienced a negative growth rate of 7.1 percent.
U.S. Secretary of the Treasury Lew stated that growth in the eurozone and in Japan has been disappointing, but the brunt of the criticism seems to be aimed at Germany, which boasts the largest economy in the eurozone.
Since Germany is expected to eliminate its budget deficit in 2015, the United States is of the view that Germany should support the eurozone as a whole by increasing public spending.
However, German Finance Minister Schäuble disagreed, touting the importance of a balanced budget. The joint statement remained the same as that of the February meeting: “We will continue to implement our fiscal strategies flexibly to take into account near-term economic conditions.” This is like saying almost nothing at all.
In the eurozone, while Germany stresses fiscal restraint, France and Italy have asked for flexible application of the European Union’s rule against budget deficits exceeding 3 percent of GDP.
The reality of the situation is that, although it’s not even in step with the eurozone, policy coordination beyond that on a global scale pretty much can’t be expected. First of all, the eurozone should focus on a concrete plan that balances economic growth with fiscal reform while also using the EU budget.
In terms of balancing growth and fiscal soundness, Japan is not exempt. Creating the conditions in which the consumption tax can be increased to 10 percent is the duty of the government.
The United States’ homework will be smoothly advancing the shift in monetary policy. When the U.S. Federal Reserve Board (FRB) raises interest rates, meticulous caution is necessary so as not to cause chaos in the global financial markets.
The G-20 has set a target of driving up the growth rate of the world economy as a whole by 2 percent by 2018. For that reason, there is a need to once again promote structural change, including in emerging nations like China.
The joint statement, as a matter of fact, confirmed the isolated gain of the dollar, which is advancing in the foreign exchange market. As the depreciation of the yen against the dollar deepens, the burden on household finances and businesses increases through rising energy costs and so on. We must remain vigilant toward these side effects.