Bank of Japan Governor Haruhiko Kuroda said on Friday that trade protectionism won’t be a solution for fixing the problem of widening global inequality.
Speaking to reporters ahead of a meeting of Group of Seven finance ministers and central bankers in the southern Italian city of Bari, Kuroda warned that rejecting free trade would hinder global growth and exacerbate inequality.
Rectifying inequality is high on the agenda of financial leaders gathering at the G7 summit from Thursday through Saturday, although they are unlikely to discuss the issue of trade at this meeting, officials say.
Trade emerged as a sticking point at the meeting of the larger Group of 20 financial leaders in Baden Baden, Germany, in March, when ministers dropped their traditional pledge to keep global free trade open, acquiescing to an increasingly protectionist United States.
“It’s true that inequality is spreading within each country” among both advanced and developing countries, Kuroda said.
“Stopping technological innovation and free trade, and resorting to protectionism, won’t be a solution to the problem.”
The International Monetary Fund (IMF) has revised up its global growth estimates on improvements in trade activity, though the optimism was tempered by uncertainty over U.S. President Donald Trump’s administration’s trade policies.
Kuroda said a steadily recovering global economy is having a positive effect on Japan although domestic inflation remains low.
Japan’s economy has shown signs of life with a pick-up in global demand boosting exports and factory output. But inflation remains subdued despite four years of aggressive money printing, as slow wage growth dampens household spending.
The BOJ chief said Italian banks’ non-performing loans needs to be tackled quickly but he didn’t see the bad debt issue posing significant negative effects on the financial system of Italy and Europe.
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