*
Biden warns of U.S. recession unless ceiling raised
quickly
*
China's slowing inflation adds to global recession fears
*
G7 finance leaders kick off meeting in Niigata, Japan
By Leika Kihara and Andrea Shalal
NIIGATA, Japan, May 11 (Reuters) - A standoff over
raising the U.S. debt ceiling overshadowed a meeting of Group of
Seven (G7) finance leaders set to begin on Thursday, heightening
U.S. recession fears as central banks seek a soft landing for
the global economy.
President Joe Biden piled pressure on Republican lawmakers
on Wednesday to move quickly to raise the limit on the
government's permitted borrowing from the current $31.4 trillion
or risk throwing the world's biggest economy into recession.
Treasury Secretary Janet Yellen was expected to face
questions from her G7 counterparts, meeting in the Japanese city
of Niigata, on how Washington intends to prevent turbulence in
financial markets, already jittery after the recent failure of
several U.S. banks.
The U.S. debt crisis is a headache for Japan, which is this
year's G7 chair and the world's biggest holder of U.S. debt.
Japan's top financial diplomat, Masato Kanda, said on
Tuesday the G7 finance leaders might discuss the U.S. debt
ceiling but likely would not explicitly mention it in a joint
statement at the end of the meeting on Saturday.
Global economic risks, including stubbornly high inflation
and the fallout from aggressive U.S. and European interest rate
increases will likely be among key topics of debate for the G7
finance ministers and central bankers.
As rapid rate hikes by the Federal Reserve weigh on the U.S.
economy, recent data has shown signs of weakness in China, the
world's second-largest economy.
China's consumer prices rose at the slowest pace in more
than two years in April, while factory gate deflation deepened,
data showed on Thursday, dashing policymakers' hopes that a
rebound in the country's demand would underpin global growth.
Other key themes to be discussed at the G7 finance gathering
include ways to strengthen the global financial system and steps
to prevent Russia from circumventing sanctions over its invasion
of Ukraine.
Arriving in Niigata on Thursday, Yellen said the United
States and a broad coalition of other countries had provided
significant economic, security and humanitarian assistance to
Ukraine, while using sanctions and export controls to impose
heavy economic costs on Russia.
Past U.S. debt ceiling fights have typically ended with a
hastily arranged agreement in the final hours of negotiations,
avoiding an unprecedented default. In 2011, the scramble
prompted a historic downgrade of the United States' top-notch
credit rating. Veterans of that battle warn the current
situation is riskier because political divides have widened.
Back then, the G7 finance leaders said in a statement that
they were "committed to addressing the tensions stemming from
the current challenges on our fiscal deficits, debt and growth."
(Reporting by Leika Kihara and Andrea Shalal in Niigata;
Additional reporting by Tetsushi Kajimoto and Takaya Yamaguchi;
Editing by William Mallard)
