G-20 countries don’t single out Japan forex

MOSCOW - Reuters

A man walks past an electronic board showing the graphs of exchange rates between the Japanese yen and the US dollar outside a brokerage in Tokyo. The yen firmed on Feb. 15 as investors braced for the likelihood of more conflicting comments on currencies from the G20 meeting. REUTERS photo

G20 officials can’t find a common form of words on currency manipulation during the summit on Feb.15 at which divisions within the group over growth versus austerity looked set to flare back into life.

The head of the European Central Bank criticised wrangling over currencies ahead of the meeting of Group of 20 financial leaders where Japan is expected to escape any censure for its expansionary policies.

Speaking in Moscow, ECB President Mario Draghi said recent sparring over currencies was “inappropriate, fruitless and self-defeating” and U.S. Treasury official Lael Brainard warned against “loose talk”.

Draghi also said the euro’s exchange rate was in line with long-term averages, suggesting little alarm yet about its recent climb choking off prospects of economic recovery.

The currency market was thrown into turmoil this week after the Group of Seven powers - the United States, Japan, Germany, Britain, France, Canada and Italy - issued a joint statement stating that domestic economic policies must not be used to target currencies.

Tokyo said that reflected agreement that its aggressive monetary and fiscal policies were appropriate but the show of unity was shattered by off-the-record briefings critical of Japan.

A meeting in Moscow of finance officials from the G20 nations, which account for 90 percent of the world’s gross domestic product and two-thirds of its population, looked likely to be dominated by Japan’s expansive policies that have driven down the value of the yen.

But there appeared to be no consensus to demand any action, not least because others such as the United States have also printed money at a furious rate.

‘US blocks agreement’

Russia’s finance “sherpa”, Deputy Finance Minister Sergei Storchak, said the drafting discussion was proving “difficult”, but the final text would not single out Japan for criticism.

When the G20 last met in November, its statement contained a call to “refrain from competitive devaluation of currencies” that was omitted by the G7 this week in what Tokyo took to mean its policies had won a free pass.

“As the G20 meeting in Moscow gets underway, the battle lines are drawn - it isn’t ‘G6 against Japan’ as much as it is ‘G7 against G13’,” French bank Societe Generale wrote in a note.

The United States, G20 delegation sources said, was blocking attempts to agree on a commitment to cut borrowing to replace a collective pledge to halve budget deficits agreed at the G20 Toronto summit in 2010. The so-called Toronto goal expires this year.

US, Europe row

A row was also brewing between Europe and the United States over extending a promise to reduce budget deficits beyond 2016. A pact struck in Toronto in 2010 will expire this year if leaders fail to agree to extend it at a G20 summit of leaders in St Petersburg in September.