G7 financial leaders warned on Saturday of growing economic uncertainty at the end of a three-day meeting overshadowed by concerns over the US debt impasse and the fallout from Russia’s invasion of Ukraine. Reuters.

The meeting in the Japanese city of Niigata comes as global policymakers, already worried about the collapse of regional US banks and efforts to reduce dependence on China, are now forced to confront defaults by the world’s largest economies.

Despite the fact that the communique does not mention the impasse with the US debt, it constantly appears in discussions.

The lack of political agreement in the US to raise the federal government’s debt hit markets as borrowing costs rose as a result of aggressive monetary tightening by US and European central banks.

“The global economy has demonstrated resilience to multiple shocks, including the Covid-19 pandemic, Russia’s war of aggression against Ukraine and related inflationary pressures,” finance ministers and central bank governors said.

“We must remain vigilant and remain nimble and flexible in our macroeconomic policies amid heightened uncertainty about the global economic outlook,” they added in a statement after the meeting.

U.S. Treasury Secretary Janet Yellen, who said the first U.S. default could happen within weeks if the impasse is not resolved, said on Saturday that the impasse was “harder” than in the past but that she was hopeful of a way out.

British Chancellor of the Exchequer Jeremy Hunt made a scathing assessment, saying it would be “absolutely devastating” if the United States failed to reach a deal to raise the federal borrowing limit and “drain” economic growth.

G7 central bankers vowed to tackle “high” inflation and ensure that expectations of future price movements remain firmly anchored.

The issue of the US debt ceiling was discussed at a dinner on Thursday night, Japanese Finance Minister Shunichi Suzuki said at a news conference after the meeting. He refused to elaborate.

Seeking to reassure investors after the recent collapse of US banks, G7 finance chiefs in April stuck to their assessment that the global financial system was “resilient”.

But in the communiqué, they committed to address “gaps in data, supervision and regulation in the banking system.”

China, although not a member of the G7, was a central topic of discussion.

Japan has led efforts to diversify supply chains and reduce the G7’s heavy reliance on the world’s second-largest economy.

In a statement, financial leaders set a deadline of the end of the year to launch a new scheme to diversify global supply chains.

This requires the G7 to offer assistance to low- and middle-income countries to ensure they have a greater role in the supply chains of energy-related goods.

“Diversifying supply chains can help protect energy security and can help us maintain macroeconomic stability,” the statement added.

He did not mention an idea floated by the United States to consider targeted restrictions on investment in China to combat Beijing’s use of “economic coercion” against other countries.

But he said the G7 countries would work to ensure that foreign investment in critical infrastructure “does not undermine the economic sovereignty of host countries”.

Many central banks have faced a tipping point where aggressive key interest rate hikes begin to slow growth and strain the banking system.

Bank of Japan Governor Kazuo Ueda, who chaired the meeting to discuss monetary policy, said most central banks appeared to not yet be fully feeling the impact of previous interest rate hikes.

Many have said that they want to set monetary policy with this moment in mind,” he said at a press conference with Suzuki.

The group again condemned Russia’s invasion of Ukraine and promised to strengthen monitoring of cross-border transactions between Russia and other countries.

The talks will form the basis for the G7 summit starting Friday in Hiroshima, where concerns will be raised about China’s use of “economic coercion” in its foreign relations.

U.S. President Joe Biden had planned to attend the Hiroshima summit, Yellen said, but added that she had said she might cancel the trip if progress on the debt issue was insufficient.