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BOJ chief, Aso expected to deflect yen concerns

G-20 set to confirm devaluation restraint policy

Kyodo

Finance chiefs from the Group of 20 started a two-day meeting Thursday night in the U.S. with Japan expected to make an effort to play down concerns about its bold quantitative easing measures, which are weakening the yen and threatening to harm other economies.

The G-20 members are expected to basically confirm that they will refrain from competitive currency devaluation and not target exchange rates for competitive purposes, as agreed in their last meeting in February.

Bank of Japan Gov. Haruhiko Kuroda and Finance Minister Taro Aso are likely to explain that the drastic easing steps are intended to bolster Japan’s economy while reaffirming that they will refrain from competitive devaluation as the government seeks to end deflation without structural reform.

Kuroda, who will be making his international debut as BOJ chief, said the bank has “no intention at all” of weakening the yen with its monetary easing policy, although that is exactly what has happened.

“We are implementing the measures for the domestic policy goal of stabilizing prices,” he told reporters before the meeting in Washington, adding that he believes the BOJ’s stance has already been widely accepted.

The meeting comes at a time when the yen has depreciated sharply against other currencies after the BOJ launched the easing steps earlier this month to achieve its 2 percent inflation goal.

The fresh easing measures, which include BOJ purchases of long-term Japanese government bonds, have recently pushed the yen-dollar rate close to ¥100.

The currency move may soon spark criticism from emerging countries that Japan is trying to manipulate the yen lower to return to its export-driven ways.

Some may also warn that the unorthodox easing policy, coupled with like-minded moves by other advanced countries, will flood emerging markets with hot money and cause unwanted inflation.

Among the developed nations, U.S. Treasury Secretary Jack Lew said Wednesday that the United States is closely watching Japan’s monetary easing to ensure it is not aimed at weakening the yen, and that Washington will likewise be “vigilant” toward all Group of Seven industrial economies regarding exchange rates.

“It is imperative that all Group of 20 countries follow through on their recent commitment not to target exchange rates for competitive purposes,” Lew said in a speech in Washington after the U.S. Treasury Department’s semiannual currency report said it will “closely monitor Japan’s policies and the extent to which they support the growth of domestic demand.”

Before the G-20 meeting, Aso held talks with Lew and likely explained his economic policies. Aso is also expected to clarify his commitment to restoring Japan’s fiscal health, despite the BOJ’s crushing debt expansion program, since Japan and the United States were urged by G-20 finance chiefs at the previous meeting in Moscow to resolve uncertainties over their fiscal situations.