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Brexit and Bank of Japan easing described as major risks at G7 finance and central banks meeting

Monday, May 23rd 2016 - 14:29 UTC
Full article 5 comments
The meeting itself saw contentious positions between Japan and the US on the topic of further BOJ easing. The meeting itself saw contentious positions between Japan and the US on the topic of further BOJ easing.

The G7 finance ministers and central bank governors concluded their 2-day meeting in Sendai, Japan on Sunday. The discussion of international event and banking risk has set the stage for issues to be discussed at the larger G7 leaders’ summit starting on the 26th.

 The two major issues that took center stage at the meeting were the prospect of a “Brexit”, as well as further potential easing from the Bank of Japan. Both prospects pose significant risk to financial markets, as traders remain cautious going into the eventful month of June.

The meeting itself saw contentious positions between Japan and the US on the topic of further BOJ easing. Japanese Finance Minister Taro Aso said the current price action in the Yen was not considered “orderly” but US Treasury Secretary Jack Lew disagreed, suggesting the Yen market price must be accepted as is. BOJ easing has the potential to create significant directional volatility as the Federal Reserve has also signaled the possibility of a much-anticipated rate hike at its June meeting.

The second major issue considered at the meeting was the possibility of the UK exiting the EU. The prospect of so-called “Brexit” has created significant risk and uncertainty as banks and financial institutions prepare for a possible “leave” vote at the June 23rdreferendum.

Reports from the G7 meeting suggested officials shared a preference against a “leave” vote. However, little could be done to avert such a decision. The Fed has also cited Brexit as a significant concern as it mulls the trajectory of monetary policy in the months ahead. Attendees at the meeting in Sendai seemed unsure of potential contingency plans: speaking about Brexit possibilities, EU Commissioner Moscovici said there was no “Plan B”.

Among upcoming event risk, G7 policymakers also debated the effectiveness of aggressive and unconventional monetary policy. After years of substantial easing, central bankers have become vocal about the need for fiscal policy to carry its weight in distributing and further promoting economic growth. Germany and the UK reportedly remained cautious on the topic as both countries maintain more conservative stances on the role of fiscal policy. The topic was even more pertinent for countries like Japan, which is currently debating a sales tax hike.

Categories: Economy, Politics, International.

Top Comments

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  • Briton

    Yep, and wont there be a lot of humiliated red faces if we come out,
    vote leave.

    May 23rd, 2016 - 07:08 pm 0
  • Conqueror

    I don't see how the British people should be hostage to the financial markets. We have a lot more to complain about in respect of the EU. That starts from the simple premise that we were lied to in the campaigns before the June 1975 EC referendum. The EU is undemocratic. Its Parliament may be elected democratically, but it has little power. Meanwhile, more than 70% of British law is formulated in Brussels. The EU provides no protection against unwanted migration and, through its association with the ECHR, denies Britain the right to deport criminals. The EU artificially raises prices to the benefit of certain members and the detriment of others. The EU interferes in too much of British life. The EU has a long-term objective with which Britain does not agree. That objective is a federal state including the whole of Europe. Since Britain does not agree, it will have to leave sooner or later or be forced to join. Britain has a history of success in the world covering around a thousand years. We didn't need Europe before, we don't need it now. Should we appeal to the UN on the grounds that we are being denied self-determination?

    May 24th, 2016 - 06:54 am 0
  • tezza

    I want to get out too, sadly I moved to Gibraltar...with no assurance from London that Gib will be safe from Spanish threats to close the border, or cause massive delays and their vow to strangle the local's going to be tough to vote out here.

    London never stands up for Gibraltar against the conquistadors, even when their border guards opened a British diplomatic bag a while ago and almost daily sends armed civil guard boats into British territorial waters, however the poxy EU don't try to control Spain either. A tough call.

    May 24th, 2016 - 11:46 am 0
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