UPDATE 1-Japan says G7 may debate yuan, bank regulation

* Finmin Kan: Stable China growth desirable for Japan

* Kan says expects frank G7 debate instead of document
(Adds details, background)

By Leika Kihara

TOKYO, Feb 2 (BestGrowthStock) – Group of Seven finance leaders may
discuss the Chinese yuan and President Barack Obama’s financial
regulation plan when they meet in the Arctic Canadian town of
Iqaluit this weekend, Japan’s finance minister said.

China has come under heavy pressure from the G7 leading
nations to revalue its currency, which some economists say is
kept artificially low, giving it an unfair export advantage and
hindering more balanced economic growth.

Tokyo believes that a more flexible yuan is desirable but
has been more reserved than its G7 peers in its criticism of
China’s currency system on the view that pressuring Beijing
won’t work.

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

Kan, who took over as finance minister last month, had
earlier said he would closely watch any G7 debate on the yuan as
it could affect Japan’s economy, which is heavily reliant on
exports to fast-growing Asian nations like China.
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Canada has said the G7 may discuss the need for a more
flexible yuan, among other topics, at the meeting that it will
host on Friday and Saturday.

But the G7 has little leverage with China, which sits at the
larger G20 table of industrial and emerging powers. The G20 has
been overtaking the G7 as the prime forum for global economic
matters.

Beijing has continued to shrug off pressure from its major
trading partners to let the yuan appreciate, repeating its line
that stability is in everybody’s best interests.

Kan said participants at the Iqaluit meeting, which will be
his first G7, will also discuss bank regulation and the global
economy.

“There will be a lot of topics, but we will probably discuss
President Obama’s financial reforms and see what each country
has to say about that,” Kan said.

“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.”

Kan added that he expects the meeting to focus on a “frank
exchange of opinions” rather than document crafting.

The G7 finance leaders are unlikely to issue a joint
communique this time, after they agreed at the previous meeting
in Istanbul last year to make the G7 a more informal forum of
debate.

Ministers gathering in the small Arctic town are expected to
spend some time discussing the future of the G7, including
reducing the number of times they meet each year.

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(Additional reporting by Stanley White; Editing by Chris
Gallagher)

UPDATE 1-Japan says G7 may debate yuan, bank regulation