Japan's Abe: G7 sees need to boost demand, address supply constraints

Japan's Prime Minister Shinzo Abe attends a lower house budget committee session at the parliament in Tokyo, Japan, May 16, 2016. REUTERS/Toru Hanai

TOKYO (Reuters) - G7 leaders agree on the need to take measures to boost global demand and eliminate factors that hamper productivity amid lingering risks to the world economy, Japanese Prime Minister Shinzo Abe said on Wednesday.

“There are downside risks to the global economy,” such as the fallout from China’s slowdown, Abe said during a debate with opposition party leaders.

“I’ve called on the need to create demand and to remove supply-side constraints,” Abe said, in explaining what he discussed with European leaders during his visit to Europe earlier this month.

Japan will host a summit of the Group of Seven (G7) advanced economies in western Japan next week, where policy steps to address subdued global growth will be high on the agenda.

Abe said the G7 leaders have a shared understanding on the risks clouding the global outlook. “None of the leaders believe there’s no need to worry that such risks may materialize.”

Deploying fiscal stimulus steps could help boost growth particularly when Japanese, U.S. and European central banks implement ultra-loose monetary policy, Abe said.

“This view is shared among Japan, the United States, Canada, Italy, France and the European Union,” he said, leaving out Germany and Britain among G7 nations.

Abe has struggled to gain consent among the G7 nations for coordinated fiscal action to spur global growth, with countries such as Germany and Britain insisting on fiscal austerity.

Reporting by Leika Kihara; Editing by Jacqueline Wong