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G-20 statement warns against currency wars
Publication Date : 18-02-2013
The grouping's finance ministers and central bank chiefs caution against monetary policies aimed at intervening in foreign exchange markets
The Group of 20 economies wrapped up a two-day meeting Saturday with a statement strongly warning against currency wars, while giving "Abenomics" a virtual free pass.
The joint statement, issued by finance ministers and central bank chiefs, cautioned G-20 members several times against monetary policies aimed at intervening in foreign exchange markets.
It specifically called on the G-20 to avoid currency wars in which central banks effectively lower the value of their currencies to boost their countries' competitiveness.
If currency wars become a common practice, they will cause turmoil in global markets and adversely impact the world economy, it said.
The statement said central banks should control money in circulation not to induce a change in exchange rates, but to stabilise domestic prices and bring about economic recoveries.
Regarding Abenomics, the statement said the risk to the global economy had receded because of policy actions taken by Japan, the United States and Europe.
Since Prime Minister Shinzo Abe assumed office in December, the yen has weakened rapidly.
Abenomics includes bold monetary easing that has triggered a depreciation of the yen. Comments by Abe and some Cabinet members in the early days of the new Liberal Democratic Party-led government were regarded by some countries as a bid by Japan to reduce the value of the currency.
As a result, Japan's management of the economy became one of the major focuses at the G-20 meeting.
The fact that the joint statement clearly states the purpose of monetary policies should be domestic price stabilisation is, in effect, an oblique warning to Japan.
The joint statement also said the G-20 members will monitor the domestic monetary policies of countries to minimise the negative spillovers on other nations.
Emerging economies have expressed concern that because of drastic monetary easing by Japan, the United States and Europe, speculative money has poured into their economies, causing an appreciation of their currencies and asset inflation.
The statement took their dissatisfaction with the current situation into consideration.
In addressing Japan and the United States in particular, the statement urged industrialised countries to tackle midterm reforms to restore their fiscal health.