May 18, 2013
G7 fires currency warning shot
Group of Seven nations reiterated their commitment today to market-determined exchange rates and said fiscal and monetary policies must not be directed at devaluing currencies.
The intervention follows a round of rhetoric about currency wars, prompted largely by Japan's new government pressing for an aggressive expansion of monetary policy, which has seen the yen weaken sharply as a result.
The statement said the G7 powers - the United States, Britain, France, Germany, Japan, Canada and Italy - had agreed to consult closely on exchange rates which if allowed to move in a disorderly fashion could hurt economic and financial stability.
"We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates," said the statement, released by Britain which chairs the G8 (G7 plus Russia) forum this year.
Despite that, there is little suggestion that Tokyo is going to come under serious pressure when G20 finance ministers and central bankers meet in Moscow at the end of the week, not least because the United States is indulging in similar policies.
Japanese Finance Minister Taro Aso welcomed the statement, saying it recognized Tokyo's policy steps were not aimed at affecting foreign exchange markets.
"It was meaningful for us as (the G7) properly recognizes that steps we are taking to beat deflation are not aimed at influencing currency markets," Aso told reporters.
US Treasury official Lael Brainard said on Monday that while competitive devaluations should be avoided, Washington supported Tokyo's efforts to reinvigorate growth and end deflation.