Japan’s Abe urges G7 to pull together in wake of Brexit

Tokyo, June 28 (IANS) Japanese Prime Minister Shinzo Abe on Tuesday said his government will continue to liaise closely with other Group of Seven (G7) countries in a bid to mitigate the fallout from Britain voting to leave the European Union.

Abe, at a meeting here, said it was vital for advanced nations to pull together on sending a global, unified message that everything was being done to ensure stability in markets, Xinhua news agency reported.

“It is important for the G7 countries to join forces and keep sending the message to the market that we will make utmost efforts to stabilise the financial market,” Abe said.

Himself under fire for the lack of efficacy of his “Abenomics” policy blend ahead of an upper house election next month, Abe told Finance Minister Taro Aso to closely watch the currency market, which has already been viewed by the Japanese government as being subjected to “one sided moves” and take necessary steps, hinting at possible currency intervention.

The yen, often used as a safe haven in times of global economic turmoil, has been pushed higher versus a basket of other currencies following the Brexit vote, which saw the pound plummet to levels not seen in more than 30 years as the stock market here crashed 16 per cent, which was more than was lost following the Lehman shock in 2008 as well as the tsunami, quake and nuclear disaster here in 2011.

On Friday, the US dollar tanked to 99 yen at one point for the first time since November 2013, causing monumental consternation to the government and Japan’s key export sector which is heavily reliant on a weak yen to bolster profits in overseas markets and ensure their competitiveness.

Japanese exporters with a presence in Britain due to accessibility to markets in the EU, have been mulling pulling out their investments in Britain and looking to EU nations to relocate to.

Emerging economies and Asian hubs are also being floated as alternative relocation options for companies who want to invest in markets with seamless multilateral trade deals to be made.

As well as telling Aso to act swiftly if deemed necessary, Abe also told Bank of Japan Governor Haruhiko Kuroda to take the necessary measures to ensure monetary stability, to which Kuroda replied the central bank “will take all possible measures whenever needed”.

At its last policy meeting, the BOJ surprised markets by staying pat on its monetary policy, but economists believe that should the yen stay unacceptably high for much longer on confusion related to Britain’s next Brexit-related steps, or markets here remain overly pressured, then the bank would unveil more easing measures from its arsenal, which could include further plunging its interest rate into negative territory or increasing the size of its already massive asset purchasing programme.

On Tuesday, the BOJ auctioned off $1.48 billion worth of funds to financial institutions wanting to snap up the US currency, with the dollar-funds supplying auction marking the biggest since December 2014, with all bids being placed being accepted by the central bank.

Japan’s Foreign Minister Fumio Kishida, for his part, said he will talk over phone with EU Foreign Policy chief Federica Mogherini in a bid to lessen further blows from Britain’s move out of the EU and would also talk to British Foreign Secretary Philip Hammond to stay up to date with Britain’s moves.

“I hope to grasp the current situation and exchange views on the outcome of the EU summit starting on Tuesday,” Kishida said, adding that “we will continue to hear the voices of Japan’s economic circles and make efforts to heighten the predictability of the economy”.

–IANS

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