Leaders from the Group of 20 economies are expected to vow to strengthen their policy cooperation in their two-day summit ending Friday, as a slowdown in emerging economies and market confusion triggered by a potential U.S. strike on Syria could choke global economic growth.
In a statement to be released following the end of the summit in St. Petersburg, Russia, the leaders from the world's leading economies are also expected to reiterate that industrialized countries should promote fiscal consolidation to prevent a recurrence of shocks such as the eurozone sovereign debt crisis.
In the first-day session of the meeting, some members urged developed nations to carefully implement future changes to unconventional monetary policy, with fears growing the U.S. Federal Reserve's winding down of its stimulus could push down their currencies further and bring about inflation, a Japanese government official said.
Moreover, concern grew during the G-20 summit over the possible impact on the global economy of the Syrian conflict that has already hit stock markets and driven up oil prices, the official added.
Despite many hours of discussion, the leaders are still divided over a U.S.-led military action to punish the regime of Syrian President Bashar al-Assad, which allegedly used chemical weapons against rebel-held suburbs of Damascus in late August, according to local media reports.
Prime Minister Shinzo Abe, who took office last December, represented Japan in the first-day session of the summit.
As the leaders have pledged to develop "credible" medium-term fiscal strategies by the St. Petersburg summit since their meeting in Los Cabos, Mexico, in June 2012, Abe explained to his G-20 counterparts about Japan's medium-term fiscal reform plan, which was approved by his Cabinet last month.
Abe also showed his strong intention to restore Japan's precarious fiscal health, but it is uncertain whether the newly crafted plan was really seen as "credible" given that he has yet to decide whether to proceed with a scheduled sales tax hike to 8 percent from 5 percent at present next April.
Fiscal rehabilitation is one of the key challenges Abe is facing, as the world's third-largest economy has shown signs of beating nearly two decades of deflation on the back of his policies dubbed "Abenomics," centering on drastic monetary easing and massive fiscal spending.
Abe's administration has committed internationally to halving the ratio of the primary balance deficit to Japan's gross domestic product by fiscal 2015 from the level in fiscal 2010. A deficit in the balance means the country cannot finance government spending other than debt-servicing costs without issuing new bonds.
An improvement in the primary balance is viewed as the critical first step toward fiscal reconstruction, as Japan's fiscal health is the worst among major developed economies with its public debt level equivalent to more than 200 percent of GDP.
Under legislation enacted last year, the consumption tax rate is scheduled to be further lifted to 10 percent in October 2015, aiming to finance swelling welfare costs amid the rise in the proportion of elderly people.
Abe's government has also promised to turn the primary balance into a surplus by fiscal 2020, but the latest estimate by the Cabinet Office indicates Japan cannot accomplish it even if the planned sales tax hikes are carried out and the economy is on a firm growth path.
Abe skipped the whole of the second-day session as he left Thursday night for Buenos Aires, Argentina, where he will make the final presentation at a meeting of the International Olympic Committee for Tokyo's bid to host the 2020 Summer Games.
Finance Minister Taro Aso, who concurrently serves as deputy prime minister, attended the summit Friday in place of Abe.
Representing more than 80 percent of the global GDP, the G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.