GENEVA – The U.N. Conference on Trade and Development on Thursday criticized Japan’s massive yen-selling intervention to ensure its export-driven economic recovery, saying such action is unlikely to lead to growth in the global economy.
“Nominal interest rates are hovering around their technical minimum, leading to emphasis on international competitiveness and exports as the main spur to growth, and to efforts being focused on preventing any real appreciation of the yen,” UNCTAD said of Japan’s economy in its 2003 Trade and Development Report.
“Such a response is unlikely to bring about a broader global recovery,” the Geneva-based organization said.
The UNCTAD criticism follows a call by the Group of Seven nations in a meeting Sept. 20 in Dubai for “more flexibility” in exchange rates.
The dollar has fallen to 33-month lows against the yen since the G7 talks because market players took the reference to flexible exchange rates as implying tacit acceptance of a weaker dollar against a range of currencies, including the yen.
The dollar traded at around 115 yen before the G7 meeting, but plunged by about 5 yen in the next seven days.
Japanese monetary authorities conducted yen-selling interventions in the foreign-exchange markets in Japan, the United States and Europe on Tuesday to stymie the yen’s advance.
The UNCTAD report urges Japan to adopt “a more aggressive macroeconomic policy stance” to spur stagnant investment and consumer spending, which it said is accompanied by persistent deflation.
Japan’s top financial officials have said the country will continue to intervene in foreign-exchange markets, claiming the intervention is aimed at stemming volatile exchange-rate fluctuations. They also argued the yen should not rise sharply against the dollar given the strong U.S. economic fundamentals.
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