TOKYO, Feb. 19 -- (Kyodo) _ The United States and emerging nations are expected to explore debate over the tapering of the U.S. Federal Reserve's large-scale monetary stimulus at a two-day meeting of the Group of 20 finance chiefs in Sydney starting Saturday.
Brazil, India, Indonesia, South Africa and Turkey -- the so-called "Fragile Five" countries that have massive current account deficits and suffer from high inflation -- are likely to argue that the U.S. central bank's move has triggered an outflow of capital from developing nations.
But the United States and some other industrialized economies are set to call on the emerging countries to promote necessary structural reforms at home, such as reducing their current account deficits, regarded as a cause of a sell-off in their currencies.
The focus is on whether G-20 finance ministers and central bank governors can agree to work together to prevent a downturn in the emerging economies from dragging down the world economy ahead, analysts said.
Market participants are also paying close attention to how Janet Yellen, who formally became the new Fed chief earlier this month and plans to attend the G-20 gathering for the first time, will respond to possible requests by the emerging nations to slow the pace of its tapering operations.
In late January, some emerging currencies plunged, sparking fears about a repeat of the "Asian currency crisis" in the late 1990s and sharply pushing down share prices across the globe, including the Dow Jones Industrial Average and the 225-issue Nikkei Stock Average.
The currencies of emerging countries with current account deficits -- entailing trade deficits -- especially came under downward pressure, as speculation grew that their importers have to sell their nations' currencies at a faster pace than their exporters exchange foreign currencies they earn overseas.
A plummet in the currencies of emerging countries has caused inflation and would severely choke the economy there.
Yellen, however, told Congress last week that the U.S. central bank has been mindful of the recent volatility in stock and foreign exchange markets, but it would not immediately affect the Fed's monetary policy.
From Japan, whose economy has shown signs of beating nearly two decades of deflation on the back of Prime Minister Shinzo Abe's economic policies, Finance Minister Taro Aso and Bank of Japan Governor Haruhiko Kuroda are scheduled to attend the G-20 meeting.
The two are expected to promise to steadily implement the nation's economic growth strategy -- the "third arrow" of the "Abenomics" policy mix along with aggressive monetary easing and flexible fiscal spending, experts said.
At their summit in St. Petersburg, Russia, in September last year, the G-20 countries pledged in a joint statement that they will develop "the comprehensive growth strategies for presentation to the Brisbane Summit" to be held in November.
Aso and Kuroda are also likely to tell their G-20 counterparts that Japan will make every effort to ease the potential negative impact on the economy of the 3-percentage-point sales tax hike to 8 percent in April, they said.
The tax hike is aimed at covering swelling social security costs for Japan's graying population, but concern lingers that it would significantly weigh on consumer spending and investment, in turn stifling the nascent economic recovery.
Indeed, U.S. Treasury Secretary Jack Lew expressed wariness about the future course of the world's third-biggest economy Tuesday, saying the outlook for domestic demand as a driving force of the economy has been "clouded."
His comment was contained in a letter, obtained by Kyodo News, addressed to "colleagues" gathering for the G-20 meeting. Lew plans to hold bilateral talks with Aso on the sidelines, the U.S. Treasury Department said.
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.
Original headline: U.S., emerging nations to explore debate over Fed's tapering at G-20
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