TOKYO — Japan, this year’s chair of the Group of Seven (G7), expects Russia’s invasion of Ukraine to dominate talks among the world’s major advanced economies, its top finance diplomat, Masato Kanda, told Reuters.
“Sanctions against Russia and support for Ukraine will be a top priority at G7 financial leaders’ meetings under Japan’s chair,” said Kanda, who will oversee G7 deputy-level talks on economic policy this year.
Among other issues at the top of the G7 agenda would be global debt problems, Kanda said in an interview. A sharp rise in U.S. interest rates has weighed on the dollar-denominated debt of emerging market economies, already weakened by the pandemic, and now reeling from the high price of food and energy imports as a result to the Ukraine war.
Kanda said Japan was working hard to help Sri Lanka, which is suffering its deepest economic crisis in 70 years, by coordinating with the Paris Club of creditor nations and the International Monetary Fund to ensure the participation of China and India in efforts to restructure the island nation’s debt.
“It is desirable to work with these non-Paris Club countries in the same way with the Common Framework,” he said, referring to a Group of 20 mechanism designed to provide a swift and comprehensive debt restructuring for nations facing difficulty meeting debt obligations after the COVID-19 shock to their economies.
“If this is realized, it would pave the way to carry out debt restructuring for other middle-income countries.”
Separately, Tokyo plans to spearhead discussions on ramping up a regional multilateral currency swaps arrangement – called the Chiang-Mai Initiative Multilateralisation (CMIM) agreement – to prepare against future financial crises and natural disasters, Kanda said.
SHARP YEN SWINGS UNDESIRABLE
Turning to the currency markets, Kanda reaffirmed Japan’s determination to intervene in the foreign exchange market to curb excessive volatility in the yen, as it did last year, intervening to buy yen for the first time in 24 years.
“There’s no change to this thinking,” said Kanda, who is vice finance minister for international affairs, and oversaw last year’s intervention to prop up the yen after it fell around 30% to 32-year lows near 152 to the dollar.
The yen has recovered ground since, and is now trading around 130 per dollar.
Kanda emphasized that the government aims to keep currency moves stable.
“Sharp, one-sided moves as seen last year are undesirable and cannot be tolerated from the viewpoints of people’s livelihoods and corporate activity,” he said.
He said that while the finance ministry oversaw the exchange the rate, the Bank of Japan (BOJ) has independence in guiding monetary policy and is focused on achieving price stability.
“Generally speaking, the BOJ targets price stability, while we aim for currency stability,” he said.
Some analysts have criticized the BOJ’s ultra-loose monetary policy, saying that it triggered the unwelcome plunge in the yen’s value last year that inflated the cost of raw material imports. (Reporting by Tetsushi Kajimoto; Additional reporting by Kentaro Sugiyama; Editing by Robert Birsel and Simon Cameron-Moore)