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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

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US debt dispute overshadows G7 finance chiefs’ summit

The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigata station, ahead of the meeting, in Niigata, Japan, May 10, 2023. REUTERS/Issei Kato
The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigat... The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigata station, ahead of the meeting, in Niigata, Japan, May 10, 2023. REUTERS/Issei Kato
The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigata station, ahead of the meeting, in Niigata, Japan, May 10, 2023. REUTERS/Issei Kato
The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigat... The logo of the G7 Finance Ministers and Central Bank Governors' meeting is displayed at Niigata station, ahead of the meeting, in Niigata, Japan, May 10, 2023. REUTERS/Issei Kato

Starting on Thursday, an impasse over extending the U.S. debt ceiling dominated a G7 finance chiefs conference, intensifying U.S. recession worries as central banks seek a gentle landing for the global economy.

President Joe Biden urged Republican legislators on Wednesday to boost the government’s borrowing ceiling from $31.4 trillion or face a recession in the world’s largest economy.

After three U.S. regional banks failed, Treasury Secretary Janet Yellen was due to answer questions with her G7 counterparts in Niigata, Japan, on how Washington plans to calm financial markets.

A default would jeopardize our epidemic recovery progress. On Thursday in Niigata, Yellen warned it would cause a worldwide recession.

Japan, this year’s G7 chair and the world’s largest U.S. debt holder, is concerned about the debt problem.

On Tuesday, Japan’s senior financial diplomat, Masato Kanda, said the G7 finance chiefs might debate the U.S. debt ceiling but not include it in a joint statement on Saturday.

“The G7 won’t be able to solve what is a purely domestic and political U.S. problem, though the group could reaffirm its resolve to cooperate in stabilizing markets in the worst-case scenario,” said Nomura Research Institute analyst Takahide Kiuchi.

Washington alone must fix this. When things go wrong, other nations pay.”

G7 finance ministers and central bankers will likely discuss global economic threats, including rising inflation and the consequences of aggressive U.S. and European interest rate rises.

Yellen said the global economy was in a “better place than many had predicted six months ago,” with inflation reducing in several G7 nations, including the U.S.

However, China’s second-largest economy has exhibited symptoms of weakening as the Federal Reserve’s quick rate rises to weigh on the U.S.

On Thursday, statistics revealed that China’s consumer prices climbed at the weakest pace in more than two years in April, while factory gate deflation intensified, shattering authorities’ expectations that a demand resurgence would boost the global economy.

The G7 finance meeting will also discuss strengthening the global financial system, preventing Russia from circumventing sanctions over its invasion of Ukraine, and diversifying supply chains away from China through partnerships with low- and middle-income nations.

Past U.S. debt ceiling disputes have concluded with a last-minute deal to prevent a default. The first U.S. credit rating drop occurred in 2011. Veterans say political divisions make the current situation scarier.

The G7 finance leaders were “committed to addressing the tensions stemming from the current challenges on our fiscal deficits, debt and growth.”


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