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G-7 commits to shoring up global growth

Pan Pylas, Associated Press

From left, Mervyn King, Governor of the Bank of England, Jim Flaherty, Finance Minister of Canada, Wolfgang Schauble Federal Minister of Finance of Germany and Taro Aso, Finance Minister of Japan, pose for the family group photo at the G7 finance ministers and central bank governors meeting in Aylesbury, England, Friday, May 10, 2013. The role of central banks in shoring up the global economic recovery is set to be a key point of discussion among top financial officials from the world's seven leading economies when they gather in the UK this weekend. In a statement Friday ahead of the Group of Seven's two-day meeting at a country house around 50 miles (80 kilometers) northwest of London, British finance minister George Osborne said the main task officials face over the coming two days is looking at how to "nurture" the recovery. (AP Photo/Alastair Grant, Pool)

AYLESBURY, England (AP) -- Japan convinced its partners in the Group of Seven leading industrial economies Saturday that it was not manipulating its currency as part of its bold attempt to get its economy out of a near two-decade period of stagnation.

And at the conclusion of a two-day meeting of leading financial representatives from the G-7 countries — the U.S., Germany, France, Italy, Japan, Canada and the U.K. — there appeared to be a formal acknowledgement that each member needed to secure their own countries' growth by balancing economically restraining austerity measures with growth-enhancing policies.

"The will is still there to reduce the deficits but there is certainly a change of tone," said Pierre Moscovici, France's finance minister at the conclusion of the two-day summit at a country house around 50 miles (80 kilometers) northwest of London.

The global recovery from recession over the past few years has been patchy. While the U.S. economy, the world's largest, appears to be gaining traction, many European countries are in recession as they try to get a grip on their public finances through deep spending cuts and tax increases.

Japan, the world's number 3 economy has been in focus over recent months as the new government of Prime Minister Shinzo Abe has embarked on a radical policy of aggressive monetary stimulus to restart the country's postwar boom, which effectively ground to a halt in the early 1990s.

One of the offshoots of the pumping more money into the Japanese economy has been a dramatic fall in the value of the yen. On Thursday, the dollar rose above 100 yen for the first time in over four years. At the time of December's general election in Japan, the dollar was trading around the 80 yen mark.

As well as potentially boosting economic growth by making its exports more competitive, the flipside of a lower yen is that it can also stoke inflation by increasing the price of imports. For a country that's seen prices fall for much of the past 15 years, that's important.

So far, the argument presented by Japanese officials that it has been targeting monetary stimulus and not its exchange rate has been accepted by Japan's G-7 partners.

British finance minister George Osborne, who hosted the two days of informal discussions, said the G-7 countries all agreed to make sure that "policies are oriented towards domestic objectives."

In a rare development, the G-7 didn't actually issue a communique at the conclusion of its deliberations. However, Osborne said the previous communique "was a successful statement and one that has been held to" — a clear reference to Japan.

In February, when markets were particularly roiled by developments in Japan, the G-7 said their respective fiscal and monetary policies were oriented towards meeting domestic requirements and that exchange rates were not a target of policy.