1. The Finance Ministers and Central Bank Governors of seven major industrial countries met today. The Managing Director of the IMF also participated in the meeting. This continues the economic policy coordination process agreed by their Heads of State or Government at the 1986 Tokyo Summit and strengthened at the 1987 Venice Summit meetings. The Ministers and Governors are convinced that this process, including the use of economic indicators, provides an important and effective means of promoting a healthy and prosperous world economy and stable monetary system.
2. The Ministers and Governors reviewed together the events, policy developments,and evolution of foreign exchange markets since the Louvre Agreement and the April G-7 meeting in Washington. They were pleased with the exchange rate stability which has been achieved and which has benefited their policies and performance.
3. In the Louvre Agreement the Ministers and Governors set out the policies which they intended individually to pursue, and undertook to monitor them together and as necessary intensify or adapt them. They note that some important decisions have been taken in individual countries which were envisaged in the February statement, and that generally the evolution of policies has been along the lines intended.
4. Some important favorable results are beginning to be seen. The substantial reduction in fiscal 1987 in the United States federal budget deficit is a very positive step, as is the continued determination in resisting protectionist pressures, and they particularly welcomed the announcement today by the President of the United States of his decision to sign legislation which will reinforce progress in reducing the budget deficit. The major program of additional expenditures and income tax cuts in Japan is being rapidly implemented. In Germany the reductions in income taxes from January 1988 will be greater than previously planned and the legislation for them has already been enacted. There have been reductions in external imbalances in real terms, although they remain high. Growth in domestic demand in surplus countries is picking up, but it is important that it improves further in some countries.
5. The Ministers and Governors note that the large trade surpluses of some newly industrialized economies continue to be an factor contributing to external imbalances. They repeat their view expressed on earlier occasions that these economies should reflect their growing importance and responsibilities by reducing trade barriers and pursuing policies that allow their currencies to reflect more fully underlying economic fundamentals.
6. The Ministers and Governors commit themselves to take further appropriate actions as necessary to achieve the agreed goals set forth in the Louvre Agreement. They will particularly intensify their efforts to liberalize markets, implement tax reforms and pursue other structural changes to strengthen the vitality of their economies, to foster a high rate of sustained non-inflationary growth and to reduce external imbalances. They reaffirmed their determination to fight protectionism, and to promote an open world trading system.
7. The Ministers and Governors reaffirmed their intentions to carry forward their economic policy coordination efforts. During the coming year the developments of their economies will be monitored closely under the strengthened surveillance arrangements outlined in the Venice Summit. In light of the progress achieved to date in laying the basis for a reduction of imbalances, and the prospects for further progress, Ministers and Governors reaffirmed that currencies are within ranges broadly consistent with underlying economic fundamentals. They recommitted themselves to continue to cooperate closely to foster the stability of exchange rates around current levels.
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