Reuters: Regulatory News: UPDATE 1-Yen slide in focus as G7 finance chiefs meet

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UPDATE 1-Yen slide in focus as G7 finance chiefs meet May 10th 2013, 09:05 Fri May 10, 2013 5:05am EDT * Central bank action to boost world economy high on agenda * Bank regulation and tax avoidance also up for discussion * Dollar jumps to 4 year high above 100 yen By David Milliken and William Schomberg LONDON, May 10 (Reuters) - Japan insisted on Friday that its tumbling yen would not be a hot topic at a meeting of global finance chiefs outside London, despite concerns in other camps about a looming currency war. "Markets determine currency moves," a senior Japanese finance official told reporters before the meeting of G7 policymakers finance leaders an English stately home 40 miles northwest of the capital. The dollar vaulted to a four-year high above the key 100 yen level on Friday and the euro was at a three year high. There has been concern Among policymakers that Japan is engineering an export-led recovery that could hinder other region's ability to grow. The yen's slide gathered pace after the Bank of Japan unveiled a massive stimulus plan last month. Other central banks have also ramped up their stimulus efforts. The European Central Bank cut interest rates last week and may boost small business lending while the U.S. Federal Reserve is continuing its sizeable bond purchase programme. The Bank of England has recently expanded a credit scheme and finance minister George Osborne has tasked the next BoE governor, Canadian central bank chief Mark Carney, with finding new ways to boost growth when he succeeds Mervyn King in July. A U.S. official said Washington would maintain its focus on Japan's aggressive monetary policy and keep up its calls on Europe to boost demand. But Canadian Finance Minister Jim Flaherty told Reuters in Thursday he regretted that countries were easing back on austerity. "I think the resolve has weakened, and I think it's mistaken," he said. "I would like to achieve a consensus that we need to do both ... fiscal consolidation and economic growth incentives." Britain's Osborne, who chairs the talks, is keen for his peers to focus on what more central banks can do to help growth at a time when most governments are trying to cut spending and raise taxes. "(This is) an opportunity to consider what more monetary activism can do to support the recovery, while ensuring medium-term inflation expectations remain anchored," Osborne said. BANK REGULATION Britain's finance ministry said the talks over Friday and Saturday at a 17th-century country house were also likely to focus on bank regulation, tax avoidance and free trade. 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 financial crisis began. As at last month's International Monetary Fund meeting, Germany may come under renewed pressure to give more support to a banking union in the euro zone. The plan could help strengthen the single currency area, but Berlin worries it may pay too much for future bank bailouts. While the first step - to create a single bank supervisor under the ECB - looks set to be in place by mid-2014, a second pillar, a 'resolution' agency and fund to close failed banks, is in doubt. And there is little prospect that a third leg, a single deposit guarantee scheme, will ever see the light of day. But Osborne will nonetheless push his fellow G7 ministers to set up mechanisms to shut down failing banks, which would otherwise be considered "too big to fail". Some of the officials said they did not know why Britain, which is chairing the G7, had called the meeting so soon after the IMF discussions. But Osborne said there was value in talks that were more informal than larger meetings of the world's major economies which form the Group of 20. The G7 - the United States, Germany, Japan, Britain, Italy, France and Canada - lost its mantle as the main forum for thrashing out differences over the global economy in 2009 when responsibility was passed to the G20. No communique and no formal decisions are expected at the meeting, which will help prepare the way for a G20 leaders' summit in Russia in September. Link this Share this Digg this Email Reprints

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