US, Japan agree to cooperate on economic fallout of Ukraine war

The top economic officials of the United States and Japan have pledged to work together to tackle rising food and energy prices while reiterating their condemnation of Russia’s war in Ukraine.

US Treasury Secretary Janet Yellen and Japanese Finance Minister Shunichi Suzuki on Tuesday said the war had increased exchange rate volatility, posing risks to economic and financial stability.

The two sides pledged to work together on currency issues under their commitments as members of the Group of Seven (G7) and Group of 20 (G20) economic groupings.

“We will continue to consult closely on exchange markets and cooperate as appropriate on currency issues, in line with our G7 and G20 commitments,” the two sides said in a joint statement following their meeting in Tokyo.

The two leaders jointly condemned Russia’s “unprovoked, unjustifiable, and illegal war against Ukraine” and said they would work together to support Kyiv in overcoming its economic challenges.

The joint statement said both sides also welcomed efforts to pursue price caps on Russian oil “where appropriate” but did not include a concrete agreement for such a scheme.

Washington has suggested that Moscow be prevented from using higher oil prices to fund the war amid warnings the global price of oil could rise by 40 percent to about $140 per barrel without a cap.

A senior US Treasury official earlier on Tuesday suggested that a price ceiling that covered Russia’s marginal cost of production could incentive Moscow to continue exporting oil while depriving it of revenues to fund the war.

Japan, which is heavily dependent on oil imports, has been grappling with limited energy supplies partly as a result of the war and the falling value of the yen against the US dollar.

Suzuki earlier on Tuesday expressed concern about the yen’s slide, saying the government would “watch the currency market even more closely while liaising with the Bank of Japan”.

Debt relief

Yellen and Suzuki also urged China and other countries who are not members of the Paris Club creditors to cooperate on debt relief for struggling low-income countries.

“We welcome G7 efforts to continue exploring ways to curb rising energy prices, including the feasibility of price caps where appropriate, while considering mitigation mechanisms to ensure that most vulnerable and impacted countries maintain access to energy markets,” the two leaders said in the statement.

Meanwhile, Yellen paid her respects to former Japanese Prime Minister Shinzo Abe, who was shot dead on Friday, at a private wake on Monday evening, praising his efforts to revitalise Japan’s economy and improve the status of women.

Yellen will visit Indonesia on Wednesday to meet Suzuki and other G20 finance officials for their July 15-16 meetings before travelling to South Korea.