G-8 vows fight against commodity surges for stable growth

OSAKA, June 14 (Kyodo) - Finance ministers from the Group of Eight major countries vowed Saturday to remain vigilant against surging commodity prices and to implement appropriate steps to fight inflation and secure stable global economic growth, as they wound up their two-day meeting in Osaka.
In a joint statement issued after the gathering in the western Japan city, the ministers said the world economy now faces ''headwinds'' with spikes in energy and food prices, which can stoke inflationary pressure, and a slowdown linked to the U.S. subprime woes.
''Elevated commodities prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure,'' the G-8 financial chiefs said.
''These conditions make our policy choices more complicated. We will remain vigilant and will continue to take appropriate actions, individually and collectively, in order to secure stability and growth in our economies and globally,'' they said.
Japanese Finance Minister Fukushiro Nukaga, who chaired the Osaka conference, said at a post-meeting press conference, ''We managed to formulate a common understanding which will be important for us to achieve stable growth of the world economy.''
He said the agreement among the finance ministers will lay the groundwork for discussions on global macroeconomic conditions at the July 7-9 G-8 summit to be held in the Lake Toya resort area of Hokkaido, northern Japan.
The ministers from Britain, Canada, France, Germany, Italy, Japan, Russia and the United States discussed how best to prevent the steep rise in commodity prices from devastating the world economy, after crude oil prices hit an all-time high of just below $140 per barrel and skyrocketing food prices caused riots in poor nations.
On the state of the global economy, the G-8 ministers said, ''For a long time, the world economy enjoyed a combination of robust growth and low inflation, but it now faces headwinds.''
French finance minister Christine Lagarde told the meeting that the three F's -- finance, food and fuel -- are the keys that will determine the future direction of the world economy and that it is necessary to grasp the big picture by examining those three correlated factors, a conference source said, adding that her comments won approval from other participants.
To wrestle with global inflationary pressure led by surging oil and food prices, the G-8 ministers agreed on the need to boost investment in oil production facilities, enhance the transparency of the oil market and raise farm productivity.
Nukaga said the G-8 ministers agreed that various elements, including geopolitical concerns and financial factors, have played a role in pushing up oil prices to record-high levels.
The G-8 urged the International Monetary Fund and the International Energy Agency to further analyze real and financial factors behind the recent surge in oil and commodity prices and to report their findings at the IMF's annual meeting in October in Washington.
A Japanese official said that opinions on the magnitude of the influence of speculative money in the oil market differed among G-8 members and that they were all aware of the need to conduct more research on oil price hikes.
No country called for tougher regulations on speculative movements in the oil market because such a step alone would not temper spiraling prices, he added.
The ministers also said in the statement that financial market conditions ''have improved somewhat in the past few months'' but ''strains remain, especially in money and credit markets.''
At the meeting, the G-8 ministers received a report from Mario Draghi, chairman of the Financial Stability Forum, that efforts have been made smoothly to boost global market resilience since the U.S. subprime crisis last summer, Nukaga said.
The FSF consists of financial authorities of major economies and experts from international organizations.
The eight major nations also adopted separate action plans on ways to combat climate change and support African development, which will be high on the agenda at the Hokkaido G-8 summit.
Although the statement contained no references to currency markets, market players watched closely for any remarks about foreign exchange movements from the meeting participants.
According to Nukaga and the Japanese official, the latest G-8 meeting, which was not attended by central bankers, did not directly take up exchange rates in the discussions and no consensus was reached on supporting the U.S. dollar.
But U.S. Treasury Secretary Henry Paulson made fresh comments in support of the dollar in a separate press conference, saying he favors a strong dollar and that the ''strong long-term fundamentals'' of the U.S. economy will be reflected in the value of the U.S. currency.
The Japanese minister said he personally believes that major economies have not changed their stance on foreign exchange from the view included in the statement at the last Group of Seven meeting in April in Washington.
In April, the G-7 expressed concern about ''sharp fluctuations in major currencies,'' referring to the dollar's steep decline against other major currencies at that time. They also pledged to ''monitor exchange markets closely and cooperate as appropriate.''
The G-7 economies consist of the G-8 members minus Russia.
The currency market came under the spotlight as speculation grew that G-8 discussions could touch on the U.S. dollar's recent weakness after Paulson unusually suggested earlier this week that Washington could step into the currency markets to shore up the dollar.
Analysts say the depreciation of the dollar has contributed to recent hikes in oil and food prices, with more speculative money funneled into the commodity markets.