The Group of 20 comprises finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the president of the European Council and by the European Central Bank.
G20 pledges against devaluation to help exporters
The Group of 20 economies will affirm a commitment to avoid weakening their currencies to gain an advantage for their exports, according to a draft statement prepared for a meeting this week in Washington.
The statement maintains a pledge made in February in Moscow to "move more rapidly towards more market-determined exchange rate systems and exchange-rate flexibility" and to refrain from competitive devaluations.
A first draft communique, prepared for meetings of finance ministers and central bankers yesterday, describes the global outlook as "generally somewhat weaker and uneven" with "unbalanced" recoveries between advanced economies and emerging markets.
The maintaining of the language on currencies suggests the G20 members will withhold direct criticism of Japan's efforts to rally its economy from 15 years of deflation so long as it does not seek to do so at their expense by driving the yen down.
US Secretary of the Treasury Jacob Lew and Bank of Canada governor Mark Carney both signalled support for Japan's stimulus push this week.
The G20 talks will be the first since the Bank of Japan announced a plan for record monetary easing. The central bank said on April 4 it planned to buy 7.5 trillion yen (HK$593 billion) of bonds a month.
The yen has dropped 5.1 per cent against the US dollar since April 3, the biggest slide among 16 major currencies and more than three times as fast as the drop in the Australian dollar, the second-worst performer.
Lew on Wednesday urged G20 officials to maintain a pledge to refrain from influencing exchange rates at the expense of other countries, saying Japan's recent policies aligned with the pact. Carney also said Japan's measures were consistent with the G20's goals and were positive for Canada's economy.
Yi Gang, a deputy governor of the People's Bank of China, said the yuan's trading band would be widened "in the near future".
"The exchange rate is going to be more market-oriented," Yi said. "Last year, they increased the floating band from 0.5 per cent to 1 per cent. I think in the near future they're going to increase the floating band even further."
G20 officials gathering in Washington will discuss the draft statement and changes may be made before its public release.
"Fiscal drag, policy uncertainty, impaired credit intermediation, private deleveraging, and an incomplete rebalancing of global demand continue to weigh on global growth prospects," the draft says.
The US and Japan will be asked to set out "credible" plans for medium-term fiscal consolidation, while acknowledging that scope exists in the US to "provide more support for economic recovery". Euro-zone countries will be asked to move more quickly towards a banking union.