Japan hopes to issue a G7 joint statement after the meeting, they added.
CHINA SLOWDOWN LOOMS
As host, Japan has drawn up a long list of other themes that will likely leave policymakers little time to enjoy Niigata’s prized rice wine, many of which are linked to China.
Among them is a plan to agree on an ambitious statement for diversifying supply chains “away from countries like China” through partnerships with low and middle-income nations.
Underscoring its desire to win over the “Global South”, Japanese Finance Minister Shunichi Suzuki invited this year’s African Union chair Comoros to an outreach meeting to be held on Friday.
Five more countries were invited to the outreach including Brazil, India and Indonesia – but not China – although emerging nations’ debt problems will feature high on the agenda.
On the other hand, Tokyo is courting China to join a creditor nations’ meeting it initiated to resolve Sri Lanka’s debt. Beijing attended the first round of talks on Tuesday as an observer, not as an official participant.
As the world’s largest official bilateral creditor, China should participate in meaningful debt relief for countries facing problems, but it has served for too long as a “roadblock” to necessary action, Yellen said last month.
There was uncertainty on whether the G7 can convince emerging economies to help build supply chains less reliant on China, with many of them having been hit by aggressive US rate hikes that have increased their dollar-denominated debt burden.
“The debt problems of emerging nations are becoming increasingly serious due in part to the strong dollar,” said Takahide Kiuchi, an analyst at Nomura Research Institute.
“The agenda of talks show how G7 is becoming increasingly politicized in nature, with an emphasis on countering China.”
For the G7 central bank chiefs, inflation will likely remain the key issue. Many of their economies are facing an inflection point, with past aggressive interest rate hikes beginning to cool growth and unsettling the banking system.
The International Monetary Fund last month trimmed its 2023 global growth outlook and warned a severe flare-up of financial system turmoil could slash output to near recessionary levels.
Data released on Tuesday showed China’s imports contracted sharply and export growth slowed in April, dashing policymakers’ hopes that a strong rebound in China’s economy will offset an expected slowdown in other parts of the world.