U.S. debt standoff overshadows G7 meeting

STORY: A standoff in Washington over raising the U.S. debt ceiling overshadowed a meeting of Group of Seven finance chiefs on Thursday (May 11).

The ministers were gathering in the Japanese city of Niigata.

Global economic risks, including stubbornly high inflation, will likely be among their key topics.

Speaking at the meeting, U.S. Treasury Secretary Janet Yellen urged Congress to raise the $31.4 trillion federal debt limit:

"A default would threaten the gains that we've worked so hard to make over the past few years in our pandemic recovery, and it would spark a global downturn that would set us back much further. It would also risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests."

The U.S. standoff is a headache for Japan, which is this year's G7 chair and the world's biggest holder of U.S. debt.

Past such fights have typically ended with a hastily arranged agreement in the final hours of negotiations, avoiding a default.

Japanese Finance Minister Shunichi Suzuki said the group wouldn't get into the details on U.S. debt:

"In the G7 this time around, it is unlikely that we will discuss in depth about specific topics."

Even as rapid rate hikes by the Federal Reserve weigh on the U.S. economy, recent data has also shown signs of weakness in China, the world's second-largest economy.

Figures out Thursday showed the country's consumer prices rose at the slowest pace in more than two years in April, while factory gate deflation deepened.

Other key themes to be discussed at the G7 gathering include ways to strengthen the global financial system following the U.S. banking turmoil, and steps to prevent Russia from circumventing sanctions over its invasion of Ukraine.