The Japan Times – Apr 15, 2016 – WASHINGTON – Finance chiefs from the Group of 20 economies agreed Thursday that excessive moves in exchange rates are undesirable, according to Finance Minister Taro Aso, who added that the global economy still faces downside risks.
Prior to a two-day gathering in Washington, Aso told U.S. Treasury Secretary Jack Lew that Tokyo had “strong concerns” over one-sided moves in the exchange market after the yen briefly surged to a 17-month high against the U.S. dollar recently.
The finance ministers and central bankers from developed and emerging countries are believed to have also agreed on avoiding competitive currency devaluation, inheriting the position stated in February in Shanghai.
On the first day of the G-20 meeting, Aso defended the Bank of Japan’s aggressive monetary easing policy, arguing that steps including a negative interest rate policy were intended for domestic purposes and “will not be restricted” by the G-20 agreement.
Aso has warned Japan will take “necessary steps if one-sided and speculative moves in exchange rates are observed,” in accordance with the G-20 agreement.
In Japan-U.S. bilateral talks, Aso and Lew agreed on the importance of commitments to foreign exchange policy that were confirmed in past G-20 finance chiefs’ meetings and frameworks, according to the U.S. government.
After the dollar recovered above the ¥109 line Wednesday, BOJ Gov. Haruhiko Kuroda told reporters before the meeting: “An excessively firm yen has corrected slightly.”
Despite a series of monetary easing measures adopted by the BOJ, including a negative interest rate policy that analysts say was aimed at weakening the Japanese currency, the yen has strengthened against the dollar, threatening the bottom lines of export-reliant Japanese businesses.
Referring to the International Monetary Fund’s downward revision of Japan’s economic outlook, the BOJ chief said the IMF’s view may have been partly formed by the yen’s appreciation from the start of this year.
According to the lender’s semiannual World Economic Outlook report, the Japanese economy is expected to contract a real 0.1 percent in terms of gross domestic product in 2017, down 0.4 percentage points from an earlier estimate in January.
The G-20 gathering took place after the IMF downgraded its global economic outlook for 2016 from 3.4 percent to 3.2 percent, prompted by a slowdown in the Chinese economy, slumping prices for commodities including crude oil and sluggish trade activity.
To support global economic growth amid financial market instability and a slowdown in emerging countries including China, the G-20 members shared the view that fiscal spending will be needed along with monetary policy and structural reforms, Aso said.
Japan, which chairs this year’s meetings of the Group of Seven industrialized nations, is hoping the G-20 gathering will pave the way for policy coordination toward the G-7 summit in Mie Prefecture next month.
During the G-20 meeting, participants are also expected to address tax avoidance in the wake of revelations in the so-called Panama Papers involving politicians and business leaders.
The leaked internal files from a Panama-based law firm pointed to wealthy clients hiding assets through offshore tax havens. The fallout included the resignation of Iceland’s prime minister.
As part of the response, the G-20 chiefs may call on regions used as tax havens to join an initiative that allows around 100 participating countries to exchange information on nonresident financial accounts.
The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.