'G7 should learn lessons from US credit woes'
Monday, 3 September 2007
TOKYO, Sept 2 (AFP): Japan's new finance minister called today for the Group of Seven (G7) industrialised nations to learn lessons from financial market turbulence triggered by turmoil in the US credit market.
Fukushiro Nukaga said the G7 should analyse the problems in the US subprime mortgage sector, where higher risk borrowers have defaulted on home loans sold on by banks to investors in the US and other countries.
The defaults and falling US house prices have cast doubt on the value of those mortgage-backed assets. Key lenders have subsequently become more cautious about extending credit generally, threatening an economic slowdown.
"It is necessary to take measures strictly among the G7 members," Nukaga, who took up his post late August, said in a television interview. "It is important for the G7 to analyse the circumstances and prevent confusion."
Problems like the subprime turmoil had the potential to trigger a flight of capital, which could cause huge uncertainty as happened during the Asian financial crisis in the 1990s, he added.
Reassuring recent comments from the US central bank and an initiative by US President George W Bush to help some troubled homeowners have helped to calm investors.
"It is true that (the market) is regaining stability," Nukaga said. "We can see the light at the end of the tunnel. But it will take time."
Nukaga spoke to US Treasury Secretary Henry Paulson by telephone Friday.
"Secretary Paulson said markets may take some time to make adjustments but that the fundamentals of the global economy are still strong," Nukaga told reporters. "He said the world economy will surely overcome these difficulties."
The G7 will hold its regular meeting in October in Washington.
Fukushiro Nukaga said the G7 should analyse the problems in the US subprime mortgage sector, where higher risk borrowers have defaulted on home loans sold on by banks to investors in the US and other countries.
The defaults and falling US house prices have cast doubt on the value of those mortgage-backed assets. Key lenders have subsequently become more cautious about extending credit generally, threatening an economic slowdown.
"It is necessary to take measures strictly among the G7 members," Nukaga, who took up his post late August, said in a television interview. "It is important for the G7 to analyse the circumstances and prevent confusion."
Problems like the subprime turmoil had the potential to trigger a flight of capital, which could cause huge uncertainty as happened during the Asian financial crisis in the 1990s, he added.
Reassuring recent comments from the US central bank and an initiative by US President George W Bush to help some troubled homeowners have helped to calm investors.
"It is true that (the market) is regaining stability," Nukaga said. "We can see the light at the end of the tunnel. But it will take time."
Nukaga spoke to US Treasury Secretary Henry Paulson by telephone Friday.
"Secretary Paulson said markets may take some time to make adjustments but that the fundamentals of the global economy are still strong," Nukaga told reporters. "He said the world economy will surely overcome these difficulties."
The G7 will hold its regular meeting in October in Washington.