Treasury Secretary Janet L. Yellen was feted by Japan’s leaders after arriving here on Sunday, lunching with the country’s top economists, meeting with senior executives from Sony and Panasonic and lighting incense at the wake of former prime minister Shinzo Abe.
But beneath the public bonhomie, Yellen’s hosts quietly expressed concerns about potential fallout from her push to create a new global price cap on Russian oil. Japanese officials have communicated that they are worried that Russia could retaliate to the price cap by restricting natural gas exports to Japan, a senior Treasury official said, damaging the country’s economy at an already precarious moment.
Yellen tried assuring the Japanese the United States will help meet its energy needs. But she still must persuade many international colleagues that her plan to diminish Russia’s massive revenue from energy sales won’t destabilize the global economy. After visiting Japan, Yellen flew on Wednesday to Indonesia for meetings of finance ministers from the Group of 20 industrialized nations, where she will attempt to rally a much broader swath of countries to pledge to buy Russian oil only at a discount rate.
If successful, her campaign could deliver a major blow to Russia’s war effort and help prevent the United States and the rest of the world from plunging into economic recession. If not, the West could continue sending billions to Russia or face skyrocketing energy prices that trigger a global recession. Soaring energy prices this year have already hammered economies in the United States and elsewhere, contributing heavily to a new 40-year high that U.S. inflation reached in June.
Yellen thinks she has a solution. “We’ve had two motivations: to deprive Russia of revenue to the maximum extent possible to impair their ability to wage war against Ukraine, and to shield the global economy from the adverse impacts of the war,” Yellen told The Washington Post on Wednesday in an interview while traveling between Japan and Indonesia. [Continue reading…]