UPDATE 2-G7 to discuss forex as part of broader talks-France

* Finmin Kan: Stable China growth desirable for Japan

* Kan says expects frank G7 debate instead of document

* French official says forex will not be discussed

explicitly, but as part of wider economic discussion

(Adds details, background)

By Leika Kihara and Tamora Vidaillet

TOKYO/PARIS, Feb 2 (BestGrowthStock) – Group of Seven finance
ministers will touch on foreign exchange issues as part of a
broader economic discussion and may bring up the Chinese
currency among other matters including financial reforms.

Speaking to reporters before G7 nations gather in the Arctic
Canadian town of Iqaluit this weekend, a French official said
currency issues would not be discussed explicitly, but within
the context of talks on sustainable and balanced growth.

In a briefing in Tokyo, Japanese Finance Minister Naoto Kan
said ministers could bring up the Chinese yuan, which many
countries have said is undervalued, giving China 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,” Kan
told a news conference.

Kan, who took over as finance minister last month, had
earlier said he 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.
[ID:nTOE60D04W]

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.

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.

DIFFERENT SPIRIT

The spirit of this weekend’s G7 gathering would shift from
that seen in the past given that the Group of 20 nations was now
considered the leading forum for the discussion of global
economic issues, said the French official.

The G7 countries would not get bogged down in negotiating a
traditional, all-embracing communique traditionally issued at
the close of such meetings, he said, although it was possible
that statements on specific issues could be made.

“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,” he said, on condition
of anonymity.

The framework for sustainable world growth, financial reform
initiatives and development issues are expected to be discussed.

Banking reforms unveiled by President Barack Obama would
also feature on the G7 agenda, said Kan from Japan.

“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.

Kan also expected 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.

Stock Market Basics

(Additional reporting by Stanley White and Brian Love; Editing
by Andy Bruce)

UPDATE 2-G7 to discuss forex as part of broader talks-France