- The Washington Times - Saturday, June 14, 2008

OSAKA, Japan | Finance ministers from the world’s top industrialized nations vowed Friday to grapple with the economic risks of soaring oil and food prices, as well as assist developing countries in the fight against global warming.

While not on the official schedule, the U.S. dollar also drew attention on the opening day of the two-day meeting as the currency has rebounded from recent lows against the euro.

The finance ministers from the Group of Eight nations - Britain, Canada, France, Germany, Italy, Japan, Russia and the United States - are mapping out an agenda for a summit of their leaders next month in northern Japan.

G-8 officials, both this weekend and in July, face a host of issues that threaten to destabilize the global economy.

Oil spiked to nearly $140 a barrel last week, and several Asian countries, including India, Indonesia and Malaysia, have slashed fuel subsidies, raising prices for millions of consumers.

The world is also facing a potential food emergency as prices of corn, wheat, rice, soybeans and other agriculture products rise. The price increases have sparked riots and protests from Africa to Asia and elevated fears of a global food crisis that could cause millions of people to suffer malnutrition.

As G-8 host, Japanese Finance Minister Fukushiro Nukaga pledged to work closely with the U.S., Japan’s most important ally, to tackle the looming dangers.

“We need to coordinate our actions closely because of the many risk factors,” he told reporters after meeting with U.S. Treasury Secretary Henry M. Paulson Jr.

Mr. Nukaga also expressed worries about the U.S. economy, gripped by a credit crunch triggered by a surge in defaults on mortgage loans to borrowers with risky credit histories. That has led to multibillion-dollar losses at financial companies and global market turmoil.

“We must remain vigilant on this,” he said.

Mr. Nukaga, however, declined to comment on his talks on currency rates with Mr. Paulson.

The weak U.S. currency is considered a key culprit in the surge in oil prices because some traders invest in oil as a hedge against inflation and a slumping dollar. It also hurts major exporters like Japan by eroding their repatriated earnings.

The dollar has strengthened in recent days after Mr. Paulson warned earlier this week that he isn’t ruling out intervening in currency markets to stabilize the currency. U.S. Federal Reserve Chairman Ben S. Bernanke also helped lift the dollar by suggesting the Fed is prepared to raise interest rates to fight inflation.

French Finance Minister Christine Lagarde said Friday that she found the dollar’s recent rise “satisfying.” She added that currencies, inflation and commodity prices are closely linked.

With central bank governors absent from this weekend’s meetings, foreign exchange is unlikely to be included in any official statements by the G-8 finance ministers. But market observers are on close watch for any dollar-supportive statements by officials.

Mr. Nukaga and Mr. Paulson, along with British Chancellor Alistair Darling and World Bank Group President Robert Zoellick, appeared together later in the day to tout funds designed to help developing nations fight global warming - another major issue for the G-8.

“As you look ahead, the biggest user of energy, in terms of the increase, is going to be the developing world,” Mr. Paulson told reporters.

Mr. Paulson said he was optimistic that one piece of the effort - a $10 billion clean technology fund - would attract broad-based support from both developed and developing countries.

The Bush administration has asked Congress for $2 billion for the fund, which would help developing countries such as China and India pay for the costs of clean energy technologies. Mr. Paulson said the U.S. would also host a pledge event before the fund’s committee meets later this year.

Britain has offered about $1.56 billion, and Japanese Prime Minister Yasuo Fukuda announced this week a pledge of up to $1.2 billion for the effort.

Mr. Zoellick said the developing world is being hit by the impact of climate change, including droughts, floods, poverty and hunger.

“These funds offer an opportunity to take action on change now,” he said. “The Climate Investment Funds are a concrete step forward toward meeting the challenge of global climate change.”

The eight finance ministers ended the day by having dinner with counterparts and other officials from Australia, Brazil, China, South Africa, South Korea and Thailand to discuss the impact of surging oil and food prices on the global economy.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2021 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide