Tags: currency | war | g7 | rates

G-7 Said to Discuss Statement to Calm Currency War Concern

Monday, 11 Feb 2013 07:25 AM

 

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The Group of Seven nations are considering releasing a statement on exchange rates this week to calm concern the world is on the brink of a currency war, three officials from G-7 countries said.

Finance officials from the world’s major industrial economies have drafted a text now being reviewed by senior policy makers, one official said on condition of anonymity. The current wording, which still may be changed, contains a commitment to market-set exchange rates and an agreement that governments don’t use fiscal or monetary policy to drive currencies, the official said.

Japanese Prime Minister Shinzo Abe’s push for more aggressive monetary policy has raised concern abroad that his government is directly seeking to weaken the yen, something it denies. In the talks, Japan has questioned the statement’s contents because it doesn’t want to be singled out for criticism, another official from a G-7 nation said, also on the basis they not be named.

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

The G-7 is looking to release the statement before a Feb. 15-16 meeting in Moscow of finance ministers and central bankers from the Group of 20, which includes the G-7 and emerging markets such as Brazil, China and India. Any pledge not to target currencies when setting policy would mark a strengthening in stance from when the G-7’s finance chiefs last commented on currencies as a group in September 2011.

The Wall Street Journal earlier reported the G-7 was debating a statement.

Japan Contacts

A Japanese government official who asked not to be named because the discussions are private said only that the G-20 nations, including those from the G-7, have been in contact ahead of meeting in Russia.

The yen has weakened about 13 percent against the dollar since mid-November in anticipation of monetary stimulus advocated by Abe, who took office in December. His campaign has drawn statements of concern from Germany to Canada as officials fret a weaker yen could harm their exporters.

Canadian Finance Minister Jim Flaherty told Bloomberg Television last month that he’d spoken to his Japanese counterpart, Taro Aso, to signal his concern. German Chancellor Angela Merkel said Jan. 24 that “I can’t say I’m completely free of worry when I look at Japan right now.” Russia, the G-20 chair nation this year, has also warned against the potential for reciprocal action to drive down exchange rates.

‘Not Deviating’

Japanese Economy Minister Akira Amari said Jan. 26 that the government’s focus is on reviving its economy and it is not actively pursuing a cheaper yen.

Japan is “absolutely not deviating from global standards,” Amari said. “I don’t comment on a foreign-exchange rate because it should be determined by the market. What we do is to implement policies.”

Shares of companies from Toyota Motor Corp. to Nissan Motor Co. have soared in recent weeks with the yen’s retreat, and economists at banks from Goldman Sachs Group Inc. to Nomura Holdings Inc. have boosted their projections for growth this year.

The G-7 hasn’t commented on currencies since a meeting of finance chiefs in the French city of Marseille in September 2011. On that occasion, they “reaffirmed our shared interest in a strong and stable international financial system and our support for market-determined exchange rates.”

“Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability,” the statement said. “We will consult closely in regard to actions in exchange markets and will cooperate as appropriate.”

The topic of exchange rates may also come up on Feb. 13 when Jack Lew testifies before U.S. lawmakers as part of his confirmation process to become U.S. Treasury secretary.

Declassified: ‘Financial War’ Could Wipe Out 50% of Your Wealth’

© Copyright 2014 Bloomberg News. All rights reserved.

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