NextGen Day

Officials from Indonesia and Japan said on Thursday that the Group of 20 major economies agreed to prevent “spillovers” from interest rate increases as central banks fight inflation while also expressing concern about rising currency volatility.

The announcements came after a two-day gathering of the G-20’s finance ministers, which Indonesia presided over.

The G-20 members, which include Japan, the United States, and Russia, are still at odds over the conflict in Ukraine, making a united statement impossible.

After the meeting, Indonesia stated in a press release that the G-20 finance ministers and central bank governors had reiterated their commitment to deal with “heightened global economic challenges,” citing rising food and energy prices, tightening financial conditions, and the ongoing coronavirus disease 2019 (Covid-19) pandemic as examples.

According to the press release, the G-20 members pledged to “calibrate the pace of monetary policy tightening correctly” to ensure price stability and prevent spillovers.

Sri Mulyani Indrawati, the finance minister of Indonesia, stated at a news conference that countries with high debt loads are at “a great risk” due to the move toward rising interest rates and tightening liquidity.

She remarked, “We shouldn’t rule out the idea of an elevated danger of recession.”

She emphasized that the G-20 should continue to be a “leading economic forum for cooperation” despite criticism of its dysfunction after Russia invaded Ukraine. She also called for “strong leadership and collaborative action” from the group during a time of complicated global economic issues.

According to Japanese Finance Minister Shunichi Suzuki, Russian President Vladimir Putin’s war is making it challenging for the G-20 to come to a “consensus,” which would serve as the foundation for a unified declaration.

At their meetings in April and July, the G-20 finance chiefs didn’t approve any unified statements. Instead, the chair produced materials that provided an overview of the discussions.

The most recent meeting in Washington coincided with the IMF and World Bank’s fall sessions. The US Federal Reserve has been aggressively hiking interest rates since early this year, driving the dollar value considerably higher.

A strong dollar reduces the price of imported products, which lowers US inflation, but it hurts poor countries the most by raising the cost of imports and increasing the weight of their dollar-denominated debts.

Resource-poor Japan has also been closely monitoring its currency’s sharp fall. With inflation in Japan being relatively low compared to other major economies, the yen has come under selling pressure due to the Fed and the Bank of Japan’s differing monetary policies.

The G-20 members, according to Suzuki, are aware of the “increasing volatility of various currencies.”

The Group of Seven industrialized countries’ finance ministers met on Wednesday before the G-20 summit. They shared Japan’s concerns by recognizing the “increased volatility” of currencies and the need to monitor markets.

For the first time in 24 years, Japanese authorities entered the foreign exchange market in September by purchasing the yen.

The G-7 conference of finance chiefs will take place from May 11 to 13 in Niigata Prefecture, according to an announcement made on Thursday by Japan, which will hold the rotating G-7 chair position for next year.

Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey are also members of the G-20 in addition to the G-7 nations of the United States, Britain, Canada, France, Germany, Italy, Japan, and the European Union.

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