Finance chiefs from the Group of Seven industrialized nations agreed Thursday to increase their budget and economic assistance to war-torn Ukraine to $39 billion this year, as well as to implement further sanctions against Russia as needed, on the eve of the one-year anniversary since Moscow invaded its neighbor.

The aid, an increase from the $32 billion pledged by the G-7 earlier, is intended to help Ukraine repair damaged infrastructure, stabilize the economy and defend the country, the G-7 said after their meeting in Bengaluru in southern India. Of the total, Japan will provide $5.5 billion.

As the negative consequences of the war have been increasingly felt, the finance ministers and central bank governors stressed the need to remain vigilant against downside risks to the economy, inflationary pressures and capital outflows, particularly in developing nations amid tightening monetary conditions and debt woes.

Japanese Finance Minister Shunichi Suzuki (L) and Bank of Japan Governor Haruhiko Kuroda hold a press conference in Bengaluru, India, on Feb. 23, 2023. (Kyodo)

"Our sanctions have significantly undermined Russia's capacity to wage its illegal war. We will continue to closely monitor the effectiveness of sanctions and take further actions as needed," the G-7 finance chiefs said in a statement.

"On the eve of the one-year mark, we reaffirm our unwavering support for Ukraine and unity in our condemnation of Russia's war of aggression," it said.

The meeting was held on the fringes of a broader Group of 20 gathering of finance chiefs this week. Japan holds the rotating presidency of the G-7, which also includes Britain, Canada, Germany, France, Italy and the United States, plus the European Union.

The G-7 has strengthened its sanctions regime to urge Russia to end its invasion of Ukraine, putting a $60 per barrel cap on seaborne crude oil from Russia, followed by additional caps on petroleum products this month.

With no immediate end to the invasion in sight, Ukraine has been stepping up calls for more international support, including military aid. The war has also sparked concerns about energy and food security, given that Russia is a major producer of oil and grain, among other items.

The G-7 said they will work to prevent any attempts to evade or circumvent sanctions. "In this context, we call on other countries to join our sanctions on Russia," their statement said.

Advanced economies have seen accelerating inflation, partly because of the war, and their central banks, including the U.S. Federal Reserve and the European Central Bank, have been raising interest rates in an ongoing cycle to curb surging prices.

"Central banks remain strongly committed to achieving price stability, in line with their respective mandates, and will clearly communicate policy stances to help limit negative cross-country spillovers," the joint statement said.

The Bank of Japan remains an outlier among the G-7 central banks, repeatedly dismissing the idea of a near-term rate hike as its 2 percent inflation target has not been achieved in a stable manner. Still, financial markets are rife with speculation that the BOJ will shift to a tighter monetary policy.

"The current (Policy Board) members believe it is necessary to maintain our accommodative monetary policy for the time being," Governor Haruhiko Kuroda told a press conference after the G-7 meeting. His term as BOJ chief ends in April.

Related coverage:

FOCUS: G-7 chair Japan urged to lead global efforts to rebuild Ukraine