US debt standoff overshadows G7 meeting

A standoff in Washington over raising US debt ceiling overshadowed a meeting of Group of Seven finance chiefs on Thursday. The ministers were gathering in the Japanese city of Niigata. Global economic risks, including stubbornly high inflation, will likely be among their key topics. Speaking at the meeting, US Treasury Secretary Janet Yellen urged Congress to raise the $31.4 trillion federal debt limit. A default would threaten the gains that we've worked so hard to make over the past few years in our pandemic recovery. And it would spark a global downturn that would set us back much further.

It would also risk undermining US global economic leadership and raise questions about our ability to defend our national security interests. The US standoff is a headache for Japan, which is this year's G7 chair and the world's biggest holder of US debt. Past such fights have typically ended with a hastily arranged agreement in the final hours of negotiations, avoiding a default. Japanese Finance Minister Sunichi Suzuki said the group wouldn't get into the details on US debt. In the G7 this time around, it's unlikely that we will discuss in depth about specific topics. Even as rapid rate hikes by the Federal Reserve weigh on US economy, recent data has also shown signs of weakness in China, the world's second largest economy. Figures out on Thursday showed the country's consumer prices rose at the slowest pace in more than two years in April, while factory gate deflation deepened.

Other key themes to be discussed at the G7 gathering includes ways to strengthen the global financial system, following the US banking turmoil, and steps to prevent Russia from circumvading sanctions over its invasion of Ukraine.

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