Reuters News - G7 to review impact of Japanese action on domestic demand: U.S.

By Anna Yukhananov

WASHINGTON | Wed May 8, 2013 1:31pm EDT

(Reuters) - The United States will focus on ways Europe can boost demand and on Japan's aggressive monetary policy during upcoming meetings of the Group of Seven finance ministers and central bankers, a U.S. Treasury official said on Wednesday.

The U.S. agenda for the G7 gathering, to be held in Britain this week, mirrors the agenda Washington brought to recent Group of 20 meetings, with an emphasis on the need for reviving growth in the euro zone, which has slipped back into recession.

"Strengthening European demand is the most important immediate imperative in reviving growth in advanced economies, and thereby global growth," the senior official told reporters, speaking on condition of anonymity.

Washington will also keep pressure on Japan, which shocked global markets last month when its central bank launched a massive bond-buying program to prod the economy out of decades of stagnation. The policy has sharply undercut the value of the yen, and refueled debate about competitive currency devaluations.

"We're closely monitoring the extent to which recent actions (in Japan) are providing support to domestic demand, and look forward to further definition of the government's plans to push ahead ambitious structural reforms," the official said.

The U.S. official said Europe can do more to boost demand in surplus economies such asGermany, and should also slow down the pace of austerity in debt-ridden euro zone countries to avoid crimping the recovery.

"It's important to recalibrate the pace of fiscal consolidation. Continued sharp fiscal consolidation risks undermining demand," the official said, adding that the United States welcomed signs thatFrance, Spain and the Netherlands got more time to meet the European Union's deficit targets.

The United States will also continue to push Europe to move toward a full banking union in the euro zone, a key issue U.S. Treasury Secretary Jack Lew brought up during his first official trip to Europe in April.

"We are seeing continued and perhaps renewed discussions on moving to banking union," the senior U.S. official said. "We welcome those discussions."

(Additional reporting by Alister Bull; Editing by James Dalgleish)