TOKYO: Substantial discussions on trade, including reform of the World Trade Organization, will likely take place at a summit of Group of 20 major economies next week in Osaka, a senior Japanese finance ministry official said on Wednesday.
Japan, which chairs this year鈥檚 G20 gatherings, will take a neutral stance in the US-China trade row and urge countries to resolve tensions with a multilateral framework, said Masatsugu Asakawa, vice finance minister for international affairs.
鈥淲ith regard to differences (on trade) between the United States and China, Japan of course won鈥檛 take sides. We will also not take any steps that go against WTO rules,鈥� said Asakawa, who oversaw the G20 finance leaders鈥� gathering earlier this month.
鈥淛apan will continue to take a multilateral approach in promoting free trade,鈥� he told a news conference.
China and the United States, the world鈥檚 two largest economies, are in the middle of a costly trade dispute that has pressured financial markets and damaged the world economy.
Markets are focused on whether US President Donald Trump and his Chinese counterpart Xi Jinping can narrow their differences when they sit down at the G20 summit.
The bitter trade war has forced the International Monetary Fund to cut its global growth forecast and overshadowed the G20 meetings that conclude with the Osaka summit on June 28-29.
At the finance leaders鈥� gathering, the G20 issued a communique warning that trade and geopolitical tensions have 鈥渋ntensified鈥� and that policymakers stood ready to take further action against such risks.
鈥淭he macro-economic impact (of the trade tensions) is an issue of concern,鈥� Asakawa said, conceding it took considerable time for G20 finance ministers and central bank heads to agree on their communique鈥檚 language on trade.
More 鈥渃oncrete鈥� discussions on trade policy will take place at the G20 Osaka summit, he added.
The row over trade appeared to spread to currency policy when Trump criticized European Central Bank President Mario Draghi鈥檚 dovish comments as aimed at weakening the euro to give the region鈥檚 exports an unfair trade advantage.
Asakawa rebuffed the view the Bank of Japan鈥檚 massive stimulus program could also provoke the ire of Trump.
He also said the G20 shared an understanding that members would accept any exchange-rate moves driven by ultra-easy monetary policies as long as the measures are not directly aimed at manipulating currencies.
鈥淭he BOJ鈥檚 ultra-easy policy is aimed at beating deflation, not at manipulating exchange rates. That鈥檚 understood widely among the G20 economies,鈥� he said.
Fears of the widening fallout from the trade war have heightened market expectations the US Federal Reserve will start cutting interest rates this year. Draghi said on Tuesday the ECB will ease again if inflation fails to accelerate.
The dovish tone of other central banks has piled pressure on the BOJ, though many analysts expect it to keep policy steady at least at this week鈥檚 rate review.