G-7 leaders warned on Friday that a British vote to leave the EU next month would seriously threaten the world economy, as they promised "more forceful" policies to boost global growth but papered over differences about fiscal stimulus.
"There are potential shocks of a non-economic origin," the leaders said in a declaration issued during their summit in Ise-Shima, central Japan. "A U.K. 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."
Japanese Prime Minister Shinzo Abe came into the summit determined to win support for stimulus. He failed to move Britain or Germany but has raised a G-7 alarm about weak global demand.
The summit is unlikely to change economic policy except in Japan, where Mr Abe is set to use it as reason to postpone a rise in consumption tax from 8 per cent to 10 per cent scheduled for next spring.
"Global growth is our urgent priority," said the communique agreed by the leaders of Canada, France, Germany, Italy, Japan, the U.K. and the U.S.
"Taking into account country-specific circumstances, we commit to strengthening our economic policy responses . . . and to employing a more forceful and balanced policy mix, in order to swiftly achieve a strong, sustainable and balanced growth pattern."
The language allows Mr Abe to claim that he moved the G-7 forwards on stimulus without committing any country to a particular policy. Germany and the U.K. remain firmly opposed to fiscal stimulus.
G-7 drafters—masters at the art of creating apparent agreement where none exists—played a timing game on the state of the world economy, saying that "since we last met downside risks to the global outlook have increased".
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Since the G-7 last met in spring 2015, before China's slowdown became apparent, that is accurate. However, it obscures what is widely regarded as better economic news since G-20 finance ministers met in Shanghai in February.
While not mentioning China directly, the G-7 also warned against dumping of steel on world markets at prices below cost. "We recognize that global excess capacity in industrial sectors, especially steel, is a pressing structural challenge . . . to be urgently addressed through elimination of market distorting measures," they said.
On security and China's construction of islands in the South China Sea, the communique was low-key, calling on nations to refrain from "force or coercion" in pushing their territorial claims, and to respect freedom of navigation and international law.
"We are concerned about the situation in the East and South China Seas, and emphasize the fundamental importance of peaceful management and settlement of disputes," says the communique.
China yesterday warned the G-7 to restrict itself to economic matters and not "escalate tensions" over the South and East China Seas. Japan and the U.S. have been pushing the European members of the G-7, which have less at stake in the Pacific, to take a firm line.
Sessions at the summit continued on Friday morning, with press conferences by several leaders scheduled for around 2pm in Japan. By mid afternoon, Mr Abe and Barack Obama are scheduled to leave for Hiroshima, where the U.S. president will make a historic visit to a memorial to the atomic bombing of 1945.