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G-20 finance chiefs to maintain past pledges on currencies

Kyodo

Group of 20 finance chiefs were to reiterate existing pledges on currencies, including commitments to avoid competitive devaluations, at the urging of Japan and the United States, a G-20 source said Saturday, as they prepared to wrap up a two-day meeting and issue a communique.

Meanwhile, the wording that the G-20 will “resist all forms of protectionism” has been dropped from the latest draft of the communique, a copy obtained by Kyodo News showed, apparently reflecting staunch U.S. opposition.

Trade and currencies have been the two main themes of the G-20 finance chiefs’ meeting, the first since U.S. President Donald Trump took office in January. The Trump administration has pulled out of the Trans-Pacific Partnership free trade deal and pledged to push an “America First” agenda.

During the first day of the gathering in Germany’s Baden-Baden, several major countries expressed opposition to reneging on the G-20 stance to promote free trade, the source said.

The draft statement says “downside risks for the global economy remain,” adding that the G-20 finance ministers and central bankers are determined “to use all policy tools — monetary, fiscal, and structural — to achieve strong, sustainable, balanced and inclusive growth.”

On the currency front, the latest draft communique involves all existing G-20 agreements on currencies.

“We reiterate that excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” the draft says.

The G-20 members also “refrain from competitive devaluations” and will not target exchange rates for competitive purposes, according to the draft.

The earlier version of the draft communique circulated by Germany only stated that the G-20 reaffirms its previous exchange rate commitments.

In demanding retention of wordings on currencies, Japan apparently sought to clarify the G-20’s shared view that foreign exchange interventions are justifiable to stem excess volatility, while the United States is seen as trying to prevent countries such as China and Japan from manipulating currency moves, the source said.

The gathering was to cover a range of topics from tepid economic growth, trade, currency policy to investments in Africa.

The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.

On Friday, Finance Minister Taro Aso and U.S. Treasury Secretary Steven Mnuchin agreed to maintain existing international agreements on currencies, including a pledge to avoid competitive devaluations.

“We both agreed on the importance of maintaining a series of past pledges (over currencies) by the G-7 and G-20 countries,” Aso told reporters after his first meeting with Mnuchin on the sidelines of the meeting.

“We will communicate closely over currencies,” the finance minister said.

The outcome of the first face-to-face talks between Aso and Mnuchin could be a relief to Japanese officials concerned about the U.S. piling pressure on Japan over currency policy. Trump has accused Japan of devaluing the yen.

The two finance chiefs also agreed to cooperate in addressing North Korea’s missile and nuclear threats through such measures as economic sanctions.

The U.S. Treasury Department said Mnuchin and Aso underscored the need to “work closely and constructively” to foster strong global economic growth.

With Japan and the United States planning to begin an economic dialogue in April, a framework under which they will discuss a range of issues concerning the economy, trade and energy, Aso called for closer coordination in the run-up to the dialogue.

Aso will head the Japanese delegation in the economic dialogue while the U.S. side will be led by Vice President Mike Pence. The United States and Japan are expected to work out agenda items that could include tax reform under the Trump administration.