World Economy

G7 Warns of Brexit Risk

G7 Warns of Brexit RiskG7 Warns of Brexit Risk

Participants of an informal symposium with Group of Seven finance leaders and academics on Friday agreed a so-called "Brexit" vote for Britain to exit the European Union at a referendum next month could lead to financial market unrest, a G7 source said.

Participants of the symposium, which is closed to the media, also agreed that relying on monetary policy alone would not lead to sustainable growth, the source said, Reuters reported.

There were no demands for quick economic stimulus programs, the source said, adding that there was instead a wide recognition among the participants that structural reforms combined with appropriate investment would strengthen growth.

The G7 finance ministers and central bank governors are gathering in Sendai, northeastern Japan, for discussions on the global economy and its risks.

The two days of talks will see host Japan keen to win an endorsement for its position that fiscal stimulus is the way to kickstart the world economy, after a rally in yen hit country's exporters and worsened a slowdown at home, AFP reported.

But Tokyo's threat of a market intervention to reverse the rally could put it on a collision course with other G7 nations, including the United States and Germany which have ruled out such moves.

French Finance Minister Michel Sapin attending the talks, also waved off the idea of countries gaining a trade advantage by manipulating their own currencies.

"Today we are in a cooperation phase, and not in an intervention or a currency war phase," he said.

The G7 group, also including members from Britain, Canada, and Italy, will try to hammer out a strategy for keeping a global recession at bay.

Ahead of their first-day session, the participants met with prominent academics, including Nobel Prize-winning economist Robert Shiller, for informal talks on ways to boost the global economy.

Widening Rift

"With uncertainty over the global economy on the rise, attention will be paid to macro-economic policy, structural reform and measures to deal with tax evasion ... and money laundering," Japanese Finance Minister Taso Ado told reporters before kicking off the meeting on Friday.

During the two-day gathering, Aso may be struggling to overcome a widening rift emerging among the most powerful advanced economies on issues ranging from currencies to monetary policy.

German Finance Minister Wolfgang Schauble, for example, warned ahead of the meeting that there was "high nervousness in financial markets," fostered by huge government debt and excess liquidity around the globe.

But G7 officials have already indicated that they would not object if Japan embarks on a course of more fiscal stimulus and structural reforms in its response to weak inflation and subdued growth.

In April, the International Monetary Fund cut its forecast for world growth for the third time in less than a year, as a slowdown in China and other emerging economies fuelled worries that the worst was yet to come.

Also on the agenda in Japan is a June referendum in Britain on whether the country should stay in the European Union. G7 finance ministers will discuss the possible repercussions of the UK leaving the bloc, with some finance ministers fearing a "Brexit" could lead to short-term turbulences in financial markets, according to a G7 source quoted by Reuters.

On Saturday, the G7 finance leaders will also discuss the need to boost cyber-security, fight terrorist financing and increase efforts to curb offshore tax havens—an issue that emerged from the Panama Papers scandal a few weeks ago.

The finance ministers are expected to draft proposals on these issues for a regular summit of G7 leaders, due to be held in Japan, next week.