G7 warns of Brexit risks, EU fast-tracks trade talks with Japan
G7 leaders reached a commitment during their summit in Japan to foster strong global growth while calling attention to the multiple geopolitical risks looming on the horizon, including concerns over North Korea, Russia and the maritime disputes in the South China Sea.
However, while they resisted Japanese prime minister Shinzo Abe´s proposal that a reference be made to the risks of another economic crisis ensuing, they did highlight the risks posed by Brexit, as the prime minister had asked for.
"Global growth remains moderate and below potential, while risks of weak growth persist," the G7 said.
The world´s richest economies also vowed to deploy "all policy tools" to strengthen demand and reduce constraints on supply.
"Insofar as Japan is the most indebted nation in the world, it would have been convenient to have the cover of an international expansion of fiscal spending for Abe to deliver another round of stimulus at home. There is still speculation that this will happen around this summer’s Upper House elections," Jane Foley, senior FX strategist at Rabobank said in a research report sent to clients.
Brexit is for British voters to decide
Britain´s leaving the European Union would risk reversing a trend towards greater global trade and investment and would put at risk the jobs they create and pose a serious risk to growth, the leaders of the world´s largest economies added.
“A UK exit from the EU would reverse the trend towards greater global trade and investment, and the jobs they create, and is a further serious risk to growth. Escalated geopolitical conflicts, terrorism and refugee flows, are complicating factors in the global economic environment,” the G7 said in a statement.
“There is a signal from us here that we wish for the UK to remain part of the European Union,” German chancellor Angela Merkel said, Reuters reported.
“But that is something to be decided by the British voters."
Trade deals to move ahead
Also at Thursday´s G7 meeting, the leaders of Japan, the EU, France, Germany, Italy and the United Kingdom announced negotiations to finalise the Japan-EU Economic Partnership Agreement/Free Trade Agreement would be accelerated with the aim of clinching a deal as early as possible in 2016.
Those talks were taking place in parallel to negotiations then under way between the EU and the United States aimed at finalising the Transatlantic Trade and Investment Partnership, also before the end of 2016.
On currency market intervention
The assembled leaders opted for the compromise option when it comes to the subject of governments intervening to artificially weaken their currencies, Foley said.
"[Not only do the G7] underscore the importance of all countries refraining from competitive devaluation” their final document read, but they also “reiterate that excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” as Japanese offcials often quip following bursts of strength in the yen, Foley explained.