Finance chiefs from the Group of 20 economies will discuss ways to stem tax avoidance when they meet this week, with the so-called Panama Papers serving up uncomfortable questions for politicians and business leaders.
They are also likely to push for greater coordination in fiscal spending to stimulate demand and keep the global economy from faltering as financial markets remain vulnerable to shocks.
At the two-day meeting starting Thursday in Washington, the finance ministers and central bankers may call on regions that function as tax havens to join an initiative linking roughly 100 nations that would see them exchanging information about financial accounts.
Taking part is Finance Minister Taro Aso. He said Tuesday that Japan has taken the lead in efforts to impose tougher international tax rules to curb avoidance by multinational enterprises.
“We want to spread our achievements to developing countries and further expand them to Panama, for example,” Aso told reporters.
The issue of tax avoidance has taken center stage after the leak of internal files from a Panama-based law firm that specializes in setting up shell companies. The data dump points to wealthy clients hiding assets in offshore tax havens and has led already to the resignation of Iceland’s prime minister.
As the chair of this year’s summit of the Group of Seven industrialized nations, Japan hopes the G-20 meeting will pave the way for policy coordination on stimulus measures as the summit approaches. It takes place in Mie Prefecture in late May.
Bank of Japan Gov. Haruhiko Kuroda will also attend the G-20 meeting.
Foreign exchange rates and stock markets remain volatile amid persistent concerns over a slowdown in Chinese and other emerging economies, and oversupply fears have prevented crude oil prices from recovering.
International Monetary Fund Managing Director Christine Lagarde has called on countries to “take decisive action” through structural reforms, fiscal spending and monetary policy.
“The global outlook has weakened further over the last six months,” she said in a speech last week, citing the slowing Chinese economy and lower commodity prices.
Her remarks came after G-20 finance chiefs agreed in February to use “all policy tools — monetary, fiscal and structural — individually and collectively” to address sluggish growth, as monetary policy alone is seen as having limited influence.
In Japan, the BOJ joined the European Central Bank in introducing a negative interest rate policy, a move that could have weakened the yen. However, the currency has firmed against the U.S. dollar and the euro, and the inflation rate remains roughly zero.
As the U.S. Federal Reserve seems to be cautious over additional interest rate hikes this year, the dollar has hit a 17-month low against the yen, dipping below ¥108 and threatening Japanese exporters.
“If there are one-sided and speculative moves, we will take necessary steps,” Aso said.
But some analysts believe Tokyo will find it difficult to conduct yen-selling market interventions, as the G-20 finance chiefs are expected to stick with their agreement to “refrain from competitive devaluations.”
Masafumi Yamamoto, chief currency strategist at Mizuho Securities Co., said if officials are issuing warnings over the yen the government must be prepared to back it up with market interventions.
“I wouldn’t be surprised if the government goes ahead with currency intervention, but a single move alone will not generate sustainable effects,” Yamamoto said, adding that it needs to be combined with other steps such as monetary easing, fiscal spending and structural reforms.
Among other issues, the participants may discuss the potential exit by Britain from the European Union as well as how that continent is dealing with an increasing number of refugees.
The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.