March 28, 2024

G-20 Forum to Be Colored by Rhetoric on Currency

MOSCOW — The debate over a currency war arrived in Moscow on Friday as finance officials from the Group of 20 leading economies sparred over Japan’s proposed expansive policies, which have driven down the value of the yen.

The G-20 forum, which put together a huge financial backstop to halt a market meltdown in 2009, is back in the spotlight after a week in which the Group of 7 rich nations tried, and spectacularly failed, to speak on currencies with one voice.

The G-7 has long been the powerhouse of financial diplomacy. But tension between Washington and Tokyo has risen over a bid by Prime Minister Shinzo Abe of Japan to end two decades of deflation.

The G-7 issued a joint statement Tuesday reaffirming “our longstanding commitment to market-determined exchange rates.” But the show of unity was quickly undermined by separate background comments to the news media criticizing Japan.

Russia, as host of the talks, says the G-20 — which includes leading emerging nations alongside rich countries and accounts for 90 percent of the world economy — will back the thrust of the G-7 text when the larger group issues its communiqué, expected Saturday.

Deputy Finance Minister Sergei Storchak of Russia said that discussion of a draft statement was proving “difficult” but that the final text would not single out Japan for criticism.

“There is no competitive devaluation, there are no currency wars,” Mr. Storchak said. “What’s happening is market reaction to exclusively internal decision making.”

On Friday, Mario Draghi, the European Central Bank president, criticized the debate on currencies. “All this chatter that has been undertaken in the past few weeks is either inappropriate or fruitless — in all cases it’s self-defeating,” he said.

When the G-20 last met, in November, its statement included a call to “refrain from competitive devaluation of currencies.” Tokyo took the omission of a similar warning by the G-7 in the past week to mean that its policies had won a free pass. The Japanese central bank has agreed to pursue unlimited monetary easing — the manipulation of asset purchases and money supply — until its inflation target of 2 percent has been met.

“As the G-20 meeting in Moscow gets under way, the battle lines are drawn — it isn’t G-6 against Japan as much as it is G-7 against G-13,” analysts at the French bank Société Générale wrote in a research note.

The yen has fallen about 20 percent since November, when it became clear that Mr. Abe was likely to become prime minister, causing a rally in Japanese stocks that the government hopes, will start growth by encouraging savers to spend and companies to invest.

Russian officials note that Japan has not intervened on currency markets to weaken the yen, suggesting that Tokyo would not be singled out as a miscreant.

Article source: http://www.nytimes.com/2013/02/16/business/global/g20-forum-moscow.html?partner=rss&emc=rss

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