Forex, financial reform set to feature on G7 agenda

By Tamora Vidaillet and Leika Kihara

PARIS/TOKYO (BestGrowthStock) – Financial reforms will top the agenda as finance officials from the world’s richest countries meet in the Canadian Arctic this week, but the group has no plans to offer a market-friendly summary of their discussions, which will also touch on foreign exchange.

Officials from several Group of Seven industrial nations insisted on Tuesday that the meeting will be more low-key than previous such events, with no formal communique like the ones that steered market expectations in the past.

Currency issues, including the strong Chinese yuan, could be discussed within the broader context of balanced global growth, and alongside talk about how to cement the recovery from recession around the world.

Financial sector reform discussions will look at proposals from U.S. President Barack Obama, as well as the roles of international institutions that already exist.

Japanese Finance Minister Naoto Kan said in Tokyo that ministers could bring up the yuan, which many countries have said is undervalued, giving China an unfair export advantage.

Tokyo believes that a more flexible yuan is desirable but has been more reluctant than its G7 peers to criticize China, arguing that pressure on Beijing won’t work.

“We’ll deal with this issue based on our understanding that stable economic growth in China is desirable for Japan,” Kan told a news conference.

Kan, who took over as finance minister last month, has promised to would watch any G7 debate on the yuan closely as it could affect Japan’s economy, which is heavily reliant on exports to fast-growing Asian nations like China.

The G7 has little leverage with China, which sits at the larger G20 table of industrial and emerging powers.

DIFFERENT SPIRIT

The ministers are meeting in Iqaluit, a remote community that’s less than 300 km (200 miles) south of the Arctic Circle. A lack of hotel rooms is forcing countries to bring smaller delegations, and bitterly cold weather is likely to keep delegates inside most of the time.

A French official said the G7 countries would not get bogged down in negotiating an all-embracing communique like those traditionally issued at the close of G7 meetings, although statements on specific issues were possible.

“The idea…is to have deep discussions in a tight group…and which allows us, to a certain extent, not to be hostage to what would be said publicly,” the official said.

There will be no list of actions for the G7 to follow through on, a senior Canadian official said in Ottawa.

The role of the G7 has become more nebulous in light of the far greater stress on the broader G20, which includes leading emerging markets as well as the G7 itself.

The Canadian official said delegates would discuss the future role of the seven-nation group amid speculation that the number of meetings could be reduced. The official said the G7 does not compete with the G20, and does not consider itself a lobbying bloc within the larger group.

Kan said banking reforms unveiled by President Barack Obama would also feature on the G7 agenda.

“We’re also likely to talk about the global economy, which has recovered from the Lehman shock, but has left many countries with fiscal burdens,” he said.

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(Additional reporting by Stanley White, Brian Love and Louise Egan; editing by Janet Guttsman and Jeffrey Hodgson)

Forex, financial reform set to feature on G7 agenda