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Japan's Abe urges G7 to pull together in wake of Brexit to bring stability to markets

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 told a Council on Economic and Fiscal Policy meeting that 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.

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

During the meeting, Abe, himself under fire for the lack of efficacy of his "Abenomics" economic policy blend ahead of an upper house election next month, 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 percent, 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 U.S. 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 European Union, 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, at the meeting, 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 program.

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

Also at the meeting, chairman of the Japan Business Federation, known here as Keidanren, Sadayuki Sakakibara, said that both the government and Japanese businesses "need to prepare for a number of risks" although noted that the Brexit situation differed entirely from the 2008 collapse of Lehman Brothers.

"The upset in the global exchange and financial market needs to be resolved as soon as possible and the G7 needs to cooperate in maintaining globalism while breaking away from protectionism and isolationism," the leader of the powerful business lobby told the meeting.

Japan's Foreign Minister Fumio Kishida, for his part, told the meeting he will hold telephone talks with EU Foreign Policy chief Federica Mogherini in a bid to lessen further blows from Britain's move out of the EU on Japan 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 Tuesday," Kishida told the meeting, adding, "We will continue to hear the voices of Japan's economic circles and make efforts to heighten the predictability of the economy."

[Source: Xinhua, Tokyo, 28Jun16]

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small logoThis document has been published on 29Jun16 by the Equipo Nizkor and Derechos Human Rights. In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.