Japan is being cast as the villain in a heated currency drama, accused of driving down the yen’s value to shore up its fragile economy, as a statement from financial powers fails to reassure markets ahead of G20 talks.
A global war of words has seen the new government in Tokyo reject claims of manipulation, and reasserting its mantra of big spending and aggressive monetary easing is meant to boost the economy after two decades of limp growth and deflation.
The rhetoric of Shinzo Abe’s fledgling administration, however, has sent the yen tumbling in recent months, angering some European officials, who hinted at their own intervention to tame the soaring euro and protect exporters.
With talk growing of a global war in which nations weaken their currencies to gain an export advantage, the Group of Seven richest nations waded into the debate to warn forex market turbulence would hurt financial stability.
“We... reaffirm our longstanding commitment to market-determined exchange rates and to consult closely in regard to actions in foreign exchange markets,” said a brief G7 statement.
G7 Members -- Britain, France, Germany, Italy, Japan, the United States and Canada -- would keep fiscal and monetary policy limited to meeting “our respective domestic objectives” and “not target exchange rates”, it added.