Japanese Finance Minister Taro Aso and Bank of Japan Governor Haruhiko Kuroda may have felt relief as Group of Seven financial chiefs concluded their two-day meeting Saturday without overtly criticizing the BOJ’s bold monetary easing policy which has been credited with weakening the yen.
The U.S. dollar moved close to the 102 yen line on Friday in New York, the highest level since October 2008 on optimism for the U.S. economic recovery.
The outcome of the G-7 meeting, which could be taken as tacit approval for the current depreciation of the yen, is likely to fuel further dollar buying, coupled with growing speculation the U.S. Federal Reserve may wind down its quantitative easing policy earlier than expected.
“There were no critical views against the BOJ’s monetary easing policy or a weak yen at the G-7,” Aso told a press conference after the G-7 parley.
There was no debate regarding the dollar moving above the 100 yen level, he added.
Despite some remarks ahead of the weekend conference by G-7 participants that could be taken as warnings against Japan’s aggressive monetary policy and the excessive slide of the yen, the G-7 did not issue a joint statement.
British finance minister George Osborne, the meeting’s chairman, told a press conference that the G-7 reaffirmed the commitment it made in February not to target foreign exchange rates with fiscal and monetary policy.
“The G-7 statement earlier this year was a successful statement and one that has been held to,” he said.
However, it remains unknown how other participants reacted to the BOJ’s unconventional accommodative policy and the sharp depreciation of the yen, as the G-7 is a closed-door gathering.
While a weak yen is a welcome development for Japan, as it helps boost exports by pricing Japanese products more competitively abroad, it may negatively affect small and midsize firms by inflating import prices of raw materials.
U.S. Treasury Secretary Jack Lew said in a television program aired Friday that Japan’s plan to stimulate its economy needs to be in line with the G-7 accord in February to avoid currency devaluation competition. “We’ve made clear that we’ll keep an eye on that.”
Asked to comment on Lew’s remarks, a Japanese official told reporters Friday, “We are abiding by that (G-7 agreement).”
“We don’t mind if they want to monitor our movement. We are not intervening (in the currency market),” the official said.
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