G-7 avoids confrontation with Japan

While all the international conferences on money may seem a bit over-covered and like they don’t have much influence, each business news outlet tends to focus on different parts of their talks. It’s important to cover meetings when the seven largest economies get together to discuss monetary policy. But what’s more interesting is what the reporters and editors think is most important – and how often that focus differs.

Here’s the lead from the Wall Street Journal:

The Group of Seven leading industrial nations on Saturday reaffirmed their commitment to refrain from deliberately weakening currencies through monetary policies.

The renewal of the commitment comes two days after the U.S. dollar’s exchange rate rose above ¥100 for the first time in four years, a milestone that was partly a consequence of a large stimulus program announced by the Bank of Japan in April.

The yen’s sharp drop is a potential source of tension with other G-7 nations as it benefits Japanese manufacturers at the expense of their rivals elsewhere.

However, U.K. Chancellor of the Exchequer George Osborne on Saturday worked to dispel speculation that there are strains within the G-7, saying the statement members made in February—a pledge to let market forces determine exchange rates and an assertion that central-bank policy would be focused solely on domestic objectives—had been successful.

The New York Times story chose to focus its introduction on Japan and the avoidance of tension about its stimulus policies:

Finance ministers from leading global economies on Saturday avoided a public rift with Japan over policies driving down the value of its currency, while keeping up pressure on Germany to help lift growth in Europe.

At the end of two days of talks among the Group of 7 finance ministers outside London, other nations appeared to accept — at least for now — Japan’s explanation that its new monetary efforts were meant to stimulate its domestic economy, rather than to drive down the yen on international currency markets.

The chancellor of the Exchequer in Britain, George Osborne, said on Saturday that ministers from the G-7, made up of the United States, Germany, Japan, Britain, Italy, France and Canada, had reaffirmed earlier commitments on exchange rates and agreed to make sure policies are “oriented towards achieving domestic objectives.” Other officials described the talks as in-depth and positive. Last week, the dollar breached the 100-yen mark for the first time in over four years.

The two-day meeting, in Buckinghamshire, also focused on efforts to stem tax avoidance and on banking reform, and Mr. Osborne said it was “important to complete swiftly our work to ensure that no banks are too big to fail.” The officials discussed efforts to create a European banking union, which have slowed in recent months.

“We agreed on the importance of ensuring banks’ balance sheets are adequately capitalized to enable them to play their role in supporting the economy,” Mr. Osborne said.

The talks took place against a background of growing austerity fatigue in Europe, and concern that the region’s focus on reducing deficits and debt risked driving some economies into a downward spiral.

Reuters (via CNBC) decided that banking reform was the biggest piece of news from the summit:

Group of Seven finance officials agreed on Saturday to press on with measures to deal with failing banks and gave a green light to Japan’s efforts to galvanize its economy.

British finance minister George Osborne said the finance ministers and central bankers meeting outside London focused on unfinished banking reforms.

The emergency rescue of Cyprus in March acted as a reminder of the need to finish an overhaul of the banking sector, five years after the world financial crisis began.

“It is important to complete swiftly our work to ensure that no banks are too big to fail,” Osborne told reporters after hosting a two-day meeting in a stately home 40 miles outside London.

“We must put regimes in place … to deal with failing banks and to protect taxpayers and to do so in a globally consistent manner,” he said.

And Bloomberg chose to focus on Europe and its continuing struggles to put member economies back on track:

European policy makers expressed a willingness to consider new ways to revive their ailing economy as they confronted fresh U.S. pressure to take action.

The bloc’s finance ministers and central bankers left weekend talks of the Group of Seven signaling that they’re poised to scale back austerity, are open to increased monetary aid and looking to unfreeze bank lending. European officials will meet in Brussels tomorrow to discuss the economy and review aid payments for crisis-struck nations from Greece to Spain.

Europe’s governments are in the midst of a policy rethink after three years of slimming budgets as they face up to a deepening recession in the euro area and a record unemployment rate that’s exceeded 12 percent. Still in doubt for economists is what kind of stimulus will actually be delivered and what effect it could have in the crisis-torn 17-member currency bloc.

“The new ‘fiscal realism’ is in evidence,” Mark Wall, co-chief European economist at Deutsche Bank AG in London, said in a report to clients. “Austerity may have reached its political limits and markets are happy to see some rebalancing. The key remains economic growth.”

But no matter which part you think it most important, the agreements and policy decisions coming out of these summits or meetings do have an effect on the average person. Markets will move, portfolio decisions will be made and investors need to pay attention to the signals coming from these meetings. It could be the difference between a return to growth and continued recession.