Friday, February 15, 2013
DJ: G-20 to Issue Pledge on Monetary Policy
MOSCOW--The Group of 20 industrial and developing nations will pledge to ensure that their monetary policy is focused on price stability and growth, rather than weakening their currencies, according to the draft of a statement they intend to release Saturday.
In seeking to boost anemic growth, many G-20 members have resorted to unprecedented levels of monetary stimulus. In many cases, that has weakened their currencies and created problems for large developing countries, which have seen large capital inflows that make their currencies stronger.
The latest round of stimulus measures has led to fresh accusations that some countries may be seeking to deliberately weaken their currencies, and gain an advantage by boosting their exports at the expense of those from other countries.
G-20 finance ministers and central bankers are holding their first meeting of the year here Friday and Saturday, and as usual are preparing a statement on the state of the world economy and other issues.
A senior official with a G-20 government who is involved in the drafting of the communique said in an interview that finance ministers and central bank heads will say Saturday that they will monitor "spillovers" from their monetary policy actions.
"Monetary policy should be directed toward domestic price stability, while continuing to support economic recovery," the draft of the statement says, according to the senior official.
The G-20 finance officials will make a broader pledge to avoid policies designed to further their own national interests at the expense of others.
"We reaffirm our commitment to achieve a lasting reduction in global imbalances through our joint actions to avoid persistent exchange-rate misalignment, refrain from competitive devaluation, resist protectionism in all forms and keep markets open," the draft statement says.
The so-called currency wars are likely to feature heavily in discussions among G-20 officials.
In recent months, comments from Japanese Prime Minister Shinzo Abe and his aides suggesting they were targeting a specific, weaker exchange rate have irked other G-20 nations.
But the senior G-20 official said there will be no mention of an individual currency in the final communique, despite calls from some members for a more forceful statement on currency issues.
"Despite pressure from some members and especially the hosts [Russia] to have a much stronger wording in the communique than the Mexico meeting, it doesn't look like it will happen. There is no mention of the yen or any other currency in the draft," the official said.
Arvind Mayaram, India's economic affairs secretary, said that there will be little variation from the G-20's last statement on currencies in November, when finance officials met in Mexico.
"I don't see much change in the wording of the communique," said Mr. Mayaram, who is involved in drafting the statement. "We're not using the term currency wars, and no specific country or currency is expected to be mentioned."
Russian Deputy Finance Minister Sergei Storchak said that other G-20 members accept that the yen's recent weakening is a side-effect of efforts to stimulate growth, rather than the primary goal of policies adopted under the new government.
"There's no competitive devaluation and no currency wars," Mr. Storchak told reporters. "What's happening is a market reaction to exclusively internal decision-making by the new government in Japan.
Mr. Storchak said that was a view shared by countries that stand to lose most from the yen's weakness.
"The biggest trade partners of Japan accepted the policy actions by Japanese authorities," he said. "The position of the main trade partners means a lot. They should be the most affected on this case and you see they're quite calm. Probably they know much more than we know."