G7 finance ministers meeting in Tokyo this weekend failed to deliver the quick fix that jittery investors had been hoping for to ease the gloom on global markets, analysts said.
They said the absence of any concrete new measures from the G7 industrialized nations to boost economic growth would likely weigh on global share prices and the dollar next week.
The G7 -- Britain, China, France, Germany, Italy, Japan and the US -- warned in a joint statement after a one-day meeting in Tokyo that "risks have become more skewed to the downside" in the US. They said they stood ready to take further action if needed to tackle slowing global growth but that each country would decide its own policies.
"There is no doubt markets may show some disappointment although we didn't have high expectations to start with," said Hironobu Hagi, a deputy general manager in the capital markets division at Shinsei Bank. "It may be a factor to sell the dollar."
Analysts said the G7 statement appeared to reflect growing caution about the economic outlook.
"In all our economies, to varying degrees, growth is expected to slow somewhat in the short-term, reflecting wider global economic and financial developments," the G7 said.
But overall the group "simply repeated what is common knowledge," said Ryohei Muramatsu, head of Group Treasury Asia of Commerzbank in Tokyo.
"The market needs a quick fix to address two issues at the same time: the collapse of the financial markets and an economy [the US] that is headed towards a recession," Muramatsu said.
US Treasury Secretary Henry Paulson said he was confident that the US economy would avoid a recession, although growth was likely to slow. But, in a prepared statement, he said it would "take time to work through the current financial market turmoil."
Paulson tried to sound optimistic but his remarks seemed more cautious than those in the past, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
"I think he is preparing the market for a recession but in several phases," Uno said.
G7 ministers did not mention the weakness of the dollar against the euro, despite concern in Europe about the impact on exporters in the region. Instead, they again urged China to allow faster appreciation of the yuan to try to ease trade imbalances.
"The dollar is expected to downward trend. Fears that the US economy is entering a recession will continue to grow," Muramatsu said.
European Central Bank chief Jean-Claude Trichet told reporters that the bank did not rule out either raising or lowering interest rates amid growing uncertainty about growth in the 15-nation eurozone.
"We have a primary goal, which is to maintain price stability in the medium run and solidly anchor inflation expectations," he said. "We consider that the economic fundamentals are sound in Europe."
Analysts said the G7 would need to work more closely with fast-growing emerging nations in the future.
"The G7 alone cannot handle the global economy any more," said Yutaka Harada, chief economist at Daiwa Institute of Research. "The involvement of the emerging economies is inevitable for global economic coordination."
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