Bank of Canada Governor Mark Carney said major industrial nations will pressure other Group of 20 economies to refrain from targeting exchange rates, adding that Japan’s currency policy will be discussed this week.
The Group of Seven’s finance ministers and central bank governors pledged in a statement today to avoid devaluing their exchange rates in the pursuit of stronger economic growth, ahead of a meeting of G-20 officials in Moscow later this week.
“It’s important that we as the G-7 go in united and forcefully to the G-20 to enlarge that commitment as quickly as possible amongst the major emerging economies,” Carney told Canadian lawmakers today in Ottawa. While some major emerging economies have flexible currencies, others “have a lot of work to do in this regard,” he said.
Carney told lawmakers there has been “some concern” that Japan’s move to set a 2 percent inflation goal will affect its exchange rate. The G-20 will probably discuss Japanese policies this weekend, he said, adding that the country’s decisions to increase fiscal stimulus and raise the inflation target have been “major, positive developments.”
“The crucial point that we make here in Canada, and the Japanese authorities have agreed to acknowledge, is that monetary policy is focused on domestic outcomes, so focusing on the 2 percent inflation target,” Carney said.
“If monetary policy is looser, more accommodative than it was previously, as it is in Japan given that they have raised the target for inflation materially, that will have consequences for the exchange rate,” he said.