Group of Seven nations have vowed not to engage in currency wars – that is pushing down the value of their currencies to create trade advantages and boost exports.
The G7 – that’s the United States, Britain, France, Germany, Japan, Canada and Italy – have agreed to consult closely on exchange rates and said government’s fiscal and monetary policies must not be directed at devaluing currencies.
That follows concerns after Japan’s new government pressed for monetary policies that sharply weakened the yen.
However, 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 recognised Tokyo’s policy steps were not aimed at affecting foreign exchange markets.
“It was meaningful for us as (the G7) properly recognises 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.
Last week, France went as far as calling for a medium-term target to be set for the euro out of concern the exchange rate had become too strong. Berlin rejected that suggestion and said it did not view the currency as being overvalued.
French Finance Minister Pierre Moscovici made little headway at a meeting of eurozone finance ministers on Monday.
Since late last year, the euro has climbed more than 10 cents before subsiding in recent days after European Central Bank chief Mario Draghi indulged in a bit of gentle verbal intervention, saying he would monitor the impact of a strengthening currency.