G20 summit to focus on 'currency war' threat to economy
Tension builds over Japan's efforts to drive down yen, but ministers resist crackdown
Saturday 16 February 2013
Japan's aggressive attempts to spur on its struggling economy were set to escape censure from the G20 nations today as bickering in Moscow kept alive fears of a "currency war".
Finance ministers at the G20 gathering are understood to have pulled back from explicit criticism of Japan, whose prime minister Shinzo Abe has embarked on a huge programme of monetary and fiscal stimulus to jump start the world's third largest economy out of its third recession in five years.
The currency market was thrown into turmoil this week after the G7 – the United States, Japan, Germany, Britain, France, Canada and Italy – issued a joint statement warning against using domestic policy to target currencies.
But the show of unity was immediately shattered by off-the-record briefings against Japan, which needs a weaker yen to help fuel its export-driven economy.
European Central Bank president Mario Draghi yesterday labelled the behind-the-scenes briefing as "inappropriate, fruitless and self-defeating".
IMF chief Christine Lagarde and Russia's deputy finance minister Sergei Storchak also denied the ex- istence of currency wars, labelling recent swings in the yen as "market reaction to exclusively internal decision making".
G20 officials are set to disregard key parts of the G7 currency statement while making no direct mention of new debt-cutting targets – something Germany is pressing for but which the United States is opposed to.
If adopted by G20 finance ministers today, the wording will confirm that Japan will escape any censure for expansionary policies which have driven the yen lower. The G20 is set to back away from the G7's commitment not to target exchange rates, as China would be unlikely to sign up.
BNY Mellon currency strategist Neil Mellor said: "We're going to end up with a communique so bland and watered down as to be virtually meaningless."
The quantitative easing pursued by central banks around the world – including the Bank of England and the US Federal Reserve – has enraged emerging economies such as Brazil as the value of their foreign reserves dwindles, raising fears over "competitive devaluations".
CMC Markets analyst Michael Hewson said: "What the G7 basically said this week is that it is fine to manipulate your currency as long as you don't talk about it. These 'currency wars' are more like phony wars. The bigger problem the G20 has is not currency wars, it is a lack of growth."
The yen has fallen by about 20 per cent since November but the strengthening euro is also concerning European politicians as the eurozone seeks to climb out of a malaise underlined by a worse-than-expected 0.6 per cent slide in GDP in the final quarter of last year.
French President François Hollande called last week for a medium-term target for the euro, but Bundesbank president Jens Weidmann came out against such a move today, expressing fears of "a politicisation of the exchange rate".
The meeting in Moscow of finance officials from the G20 nations also looked set to lay bare differences over the balance between growth and austerity policies. The draft communique reflected a row 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.
- 1 Expert urges cat lovers to own just one animal each
- 2 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
- 3 The Simpsons death: Creator Al Jean would 'kill himself' before character like Homer or Lisa
- 4 British man raped while urinating in bushes at Oktoberfest beer festival in Germany
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Expert urges cat lovers to own just one animal each
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
'Women, walk wherever you want' posters taken down in Stamford Hill following 'unacceptable' signs separating men and women
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Should gay sex be illegal? 16% of Britons think so
- < Previous
- Next >
iJobs Money & Business
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...