2:36 AM
By Rie Ishiguro and Gernot Heller
PARIS | Fri Feb 18, 2011 5:24am EST
PARIS (Reuters) - The world's major economies were split down the middle on Friday over how to measure imbalances in the global economy in a bid to avert future financial crises, Japan's finance minister said.
Speaking hours before the start of a meeting of G20 finance ministers and central bankers, Yoshihiko Noda said he was not sure they would reach any agreement on a set of indicators to assess economic equilibrium.
"It is uncertain whether the countries will agree on all indicators, but I think agreement on some is possible," Noda told reporters.
"From working group discussions, I get the impression countries are now split in half about their opinions."
In preparatory talks on Thursday, G20 sources said China and Germany dragged their feet over a balance of payments indicator while Beijing was resisting including measurements of the real foreign exchange rate and currency reserves in the package.
Chinese central bank governor Zhou Xiaochuan, in Paris for the G20 meeting, said Beijing would decide the pace of the appreciation of the yuan on its own and would be swayed by pressure from other countries.
A German source cast doubt on a deal at the two-day Paris session, saying Berlin wanted nothing less than a full list of five indicators to be used to tackle global mismatches.
"It is hard for us to imagine leaving some out, for example leaving out the currency-related ones while holding on the current account one," the German source told Reuters.
TWO-STEP
France has run into opposition with its push for greater transparency and regulation of commodities prices and a reform of the international monetary system and is pinning its hopes on measuring imbalances in the world economy, where the G20 nations account for around 85 percent of GDP.
French Finance Minister Christine Lagarde said she hopes the first ministerial meeting of France's year-long G20 presidency would agree a preliminary list of indicators in a two-step process leading to guidelines for more coordinated global economic policies by the end of the year.
With world shares hitting fresh 30-month highs, driven by bullish views of economic growth, investors seem content for the G20 to achieve little, in contrast with the height of the crisis two years ago when markets were baying for policy action.
"Some may view this sort of outcome as a lost opportunity to prevent future risks, but markets would probably not welcome a heavy-handed attempt to subjugate domestic priorities for the sake of external balance, which could be disruptive unless done just right," Barclays Capital wrote in a research note.
The world's top central bankers were expected to discuss commodity price inflation and how to handle the divergence between booming emerging market economies and sluggish growth in most developed economies in a public debate on Friday.
Bank of Japan Governor Masaaki Shirakawa acknowledged that loose monetary policy in the developed world was pushing capital into emerging economies and helping inflate commodities prices but said it was necessary nonetheless.
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