Global finance chiefs reaffirmed their three-month old commitment not to manipulate currencies, signaling acceptance of the weakest yen in four years.
Finance ministers and central bankers from the Group of Seven today agreed “not to target exchange rates,” U.K. Chancellor of the Exchequer George Osborne said after chairing a meeting in Aylesbury near London. He said members have “held to” their February pledge to avoid doing so.
The yen this week fell beyond 100 per dollar for the first time since 2009, extending a decline fueled by more aggressive monetary policy from the Bank of Japan. While the slide may hurt trade rivals, the G-7 officials are signaling acceptance of Governor Haruhiko Kuroda’s argument that Japan’s bond buying is aimed at bolstering growth and not at manipulating the currency.
“The Bank of Japan isn’t targeting the exchange rate,” Kuroda told reporters yesterday. Finance Minister Taro Aso said there had been no criticism of Japan’s policies at the G-7 and he had no opinion on his currency’s value.
The BOJ last month announced it would double its monthly bond purchases in an attempt to deliver 2 percent inflation within two years and end two decades riddled with recession and deflation.
“The world community has made clear that domestic tools that are designed to deal with domestic growth are within the bounds of what the international community thinks is appropriate,” U.S. Treasury Secretary Jacob J. Lew said yesterday. “We’ve made it clear that we’ll keep an eye on that.”
With the yen falling, nations including Australia, New Zealand and Switzerland are also moving to counter climbing currencies before they hurt their exporters. The risk is such efforts provoke retaliation from trade partners.