* Merkel and Japan's Abe signal G7 unity on Ukraine crisis
* Germany, Japan ready for new sanctions but prefer dialogue
* Chancellor says no need for Europe to copy "Abenomics"
(Adds quotes and details)
By Stephen Brown and Andreas Rinke
BERLIN, April 30 Germany's Angela Merkel and
Japanese Prime Minister Shinzo Abe said on Wednesday leading
industrial powers would stand united on further sanctions
against Russia if needed, despite Moscow's threat to retaliate
against foreign energy companies.
Both are struggling to strike a balance between admonishing
Moscow for annexing Ukraine's Crimean peninsular and failing to
control pro-Russian separatists in eastern Ukraine, and looking
after their countries' business interests and energy supplies.
The European Union, Japan and the United States have placed
visa bans and asset freezes on dozens of individuals, some close
to Russian President Vladimir Putin, but have held back on wider
trade sanctions despite an escalation of the crisis in Ukraine.
Merkel said that if separatists holding observers from the
Organisation for Security and Cooperation in Europe in eastern
Ukraine do not free them, and Russia does not use its influence
to secure their release, "then we should not shy away from the
need for further sanctions".
"We have always managed to agree on G7 declarations so far
and I see no reason why further steps should not be unanimous,"
she said after talks with Japanese premier Abe in Berlin, the
first stop of his week-long tour of Europe.
Following a new round of Western sanctions aimed at business
leaders and firms close to Putin this week, the Russian leader
said he saw no need for counter-sanctions but might reconsider
foreign firms' participation in areas such as Russian energy.
But Merkel said Europe, the United States and G7 partners
would stick to their joint response to Russia, adding: "We have
thought through these measures and we have no reason to question
our unity on sanctions or see it in another light."
"Japan, Germany and the other G7 countries will work
together on what possible further measures need to be taken,"
said Abe, though he said it was also "important to communicate
with the Russian side". This is a view shared with Merkel, who
has the most fluent contacts with Putin among Western leaders.
Both emphasised the importance of Ukraine carrying out free
elections on May 25 to give people the democratic choice of who
should succeed pro-Russian president Viktor Yanukovich, who fled
Kiev in February in the midst of bloody protests.
ABENOMICS? NO THANKS
Merkel offered encouragement for Japan's long battle against
deflation, but rejected the idea of Europe - where policymakers
including European Central Bank chief Mario Draghi have played
down talk of a similar threat - copying Japan's new stimulus
policies, nicknamed "Abenomics".
"We in Europe - and this is what the Bundesbank and others
including the European Central Bank say - are not at immediate
risk of deflation and our path of economic consolidation is the
right one," said Merkel, who responded to the euro zone crisis
by prioritising fiscal discipline over pro-growth policies.
"Japan's situation is different and specific," she said.
Abe, who has begun to reverse years of sub-par growth with
expansionary fiscal and monetary policies, told a business
audience in Berlin earlier on Wednesday that Japan was now "in
the process of freeing itself from long-lasting deflation".
His week-long visit to Europe will also take in Britain,
Portugal, Spain, France and Brussels, institutions such as NATO
and the Organisation for Economic Cooperation and Development
(OECD), and meetings with European business leaders.
(Additional reporting by Gareth Jones; editing by Ralph