Prime Minister Shinzo Abe, who chaired the Group of Seven (G-7) Ise-Shima Summit on May 26-27, repeatedly used the term "crisis" during a post-summit press conference. "We are facing the major risk of the global economy plunging into a crisis beyond the ordinary economic cycle if mistaken measures are adopted," he said.
While Abe claims that the G-7 leaders shared the sense of crisis during the summit, was that really the case?
The G-7 leaders' declaration released at the end of the summit claims differently from what Abe says. While the Japanese government argues that the G-7 pledged the full mobilization of policy measures to avert a new crisis, the original English text of the leaders' declaration reads, "We have strengthened the resilience of our economies in order to avoid falling into another crisis, and to this end, commit to reinforce our efforts to address the current economic situation by taking all appropriate policy responses in a timely manner."
French President Francois Hollande denied during a press conference that the world economy was facing a crisis, and British Prime Minister David Cameron reportedly made rather optimistic remarks about the global economy.
The Federal Reserve Board has suggested the possibility of another interest rate hike before long. If the U.S. central bank was concerned about any fresh economic crisis, it would be a long way off to raise such a possibility.
Furthermore, the Monthly Economic Report for May released by the Japanese government states that "the Japanese economy is on a moderate recovery" -- conveying no sense of crisis.
At the G-7 summit meeting, Prime Minister Abe abruptly presented a four-paper document to explain how the current global economy "resembles" the situation prior to the 2008 global financial crisis.
The document contained data indicating that the outlook for global economic growth had been revised downward before the 2008 crisis, alongside recent data showing consecutive downward revisions to the growth outlook. If the government aspires to alert against a recurrence of the global financial crisis, the document should have shown that events similar to those that triggered the 2008 crisis are taking place again.
After all, we cannot help but believe the reason why Prime Minister Abe stuck so much to the "recurrence of a crisis as serious as the 2008 Lehman Shock" was because he wanted to use it as a pretext for pushing back the sales tax hike again.
When Abe announced the postponement of the consumption tax hike in 2014, the prime minister clearly stated that he wouldn't do so again unless there is an incident as serious as the 2008 crisis or the 2011 Great East Japan Earthquake. So when he wanted to push back the sales tax raise once again, he may have been pressed with the need to create an atmosphere of a "crisis" by making the analogy of the 2008 financial shock.
The prime minister apparently aimed to derive the logic that Japan must take the initiative in contributing to the world economy now that the G-7 nations have agreed to strive to avert a crisis, and that it is absolutely unthinkable to raise the sales tax when additional fiscal stimulus measures are called for.
It is not uncommon for a G-7 summit host country to have a comparatively larger voice in the meeting. Even so, however, the interests of the G-7 member states and the other countries around the world must be pursued -- such as measures to combat poverty in African nations, the global climate change and the threat of terrorism.
Abe probably attempted to take advantage of the G-7 chairmanship to postpone the consumption tax raise scheduled for April 2017, and at the same time he sought to avert criticism that the failure of his economic policy mix led to such a postponement. For the Japanese prime minister to be taken that way undermines the confidence in Japan in the international community.
Certainly, there are sources of concern for the global economy, including the Chinese economy. What the G-7 should do is to share information with China over its snowballing debts and hastily make arrangements in which G-7 nations can take swift and concerted action in the event of a crisis. Another major source of concern for the global economy is Japan, which is the largest debtor among G-7 countries. The G-7 leaders' declaration refers to the need to curb debts held by member states to sustainable levels. For Japan to opt to take fiscal stimulus measures and postpone the sales tax hike could pose a greater risk to the global economy.
On the political front, the G-7 leaders focused on their response to Russia and China. Russia and China share common tactics in that they are "changing the status quo through the use of force," as seen in Russia's annexation of Crimea and China's aggressive advancement in the South China Sea and other areas.
While the G-7 leaders reached an agreement on their general views, there was a conflict of opinions over individual measures in responding to the issues surrounding Russia and China. While the United States and Britain adopt a hard-line stance over sanctions against Russia, there are calls for relaxing anti-Russia sanctions among Germany, France and Italy, which receive resources from Russia. Japan also takes a unique position as it is engaged in a territorial row over the four Russian-held islands off Hokkaido. After a heated discussion, the G-7 leaders failed to reach a conclusion and ended up adhering to last year's G-7 leaders' declaration in stating that it was up to Russia's response whether the sanctions will be lifted or not.
While Japan and the U.S. call for taking a tough stance toward China, Britain and France regard China as their business partner. The G-7 leaders' declaration avoided explicitly naming China and stopped short of addressing such countermeasures as the United States' freedom of navigation operations.
Amid the relative decline of the U.S. influence on the international community, the world order espousing the principle of democracy is being rattled. The G-7 nations are faced with the task of curbing such destabilization. The latest summit meeting underscored the fact that the G-7 nations are not necessarily monolithic depending on their domestic situations.
Prime Minister Abe emphasized that the G-7 is a gathering of countries that share basic values of freedom, democracy, human rights and the rule of law. True, but it would do no good if they rejected countries that they do not think share those common values.
The G-20 summit meeting with emerging countries is slated to be hosted by China in September. As the only G-7 member state in Asia and the host of the latest G-7 summit, Japan should play a special role of further expanding those basic common values to emerging countries.