The Group of 20 finance chiefs sharpened their stance against governments trying to influence exchange rates.
Two days of talks between G-20 finance ministers and central bankers ended last week with a commitment not to:
“Target our exchange rates for competitive purposes”
This stance is stronger than the one they took three months ago and might affect Japanese officials to stop publicly giving guidance on their currency’s value.
Today the yen is near its lowest level against the dollar since 2010, while policy makers are trying to calm concerns that some countries might be trying to weaken their exchange rate in order to encourage export and by that, the economic growth.
According to the G20, and contrary to the opinions of GS and Krugman noted above, the risk is a 1930’s style of devaluations and protectionism.
Bundesbank President cited that:
“Politically-motivated devaluations can’t sustainably improve competitiveness; they don’t solve structural problems and they set off reactions”
We shall mention Japan once again, as the Bank of Japan Governor Masaaki Shirakawa said:
“The Bank of Japan’s measures have been and will remain targeted at achieving a robust economy through stable prices”
In the G20 meeting, Japanese officials denied driving down their currency, and according to them, its fall was a byproduct of their effort to accelerate the Japanese economic growth rate.
More we shall mention that the IMF Managing Director said that the talk of currency wars is overblown, and Federal Reserve Chairman Bernanke said:
“The U.S. has deployed domestic policy tools to advance domestic objectives and bolstering the U.S. economy will support world growth”