G7 vows growth, fudges FX, frets DPRK, Russia, China

(Clockwise from left) British Prime Minister David Cameron, Canadian Prime Minister Justin Trudeau, European Commission President Jean-Claude Juncker, European Council President Donald Tusk, Italian Prime Minister Matteo Renzi, German Chancellor Angela Merkel, US President.

Japanese Prime Minister Shinzo Abe has been playing up what he calls parallels to the global financial crisis as growth in his country sputters. Abe will soon delay for a second time a national sales tax increase, government sources told Reuters on May 27, as the threat of deflation re-emerges and a summer election looms.

The G7 statement said: "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."

The G7 committed in their broad-ranging, 32-page declaration to market-based exchange rates and to avoiding "competitive devaluation" of their currencies, while warning against wild exchange-rate moves.

This represents a compromise between Japan, which has threatened to intervene to block sharp yen rises, and the United States, which generally opposes market intervention.

The G7 vowed "a more forceful and balanced policy mix" to "achieve a strong, sustainable and balanced growth pattern", taking each country's circumstances into account, while continuing efforts to put public debt on a sustainable path.

Abe has stressed the need for flexible fiscal policy to sustain economic recovery, while German Chancellor Angela Merkel has been skeptical about public spending to boost growth.

The G7 called global industrial overcapacity, especially in steel, a "pressing structural challenge with global implications".