The statement eased fears in Japan, where officials had been
under fire from some in Europe and the United States, who said they
were unfairly bringing down the yen's value.
Seven major developed countries including the United States and
Germany pledged on Tuesday to let foreign exchange markets determine
the value of their currencies.
The statement by the Group of 7 prompted relief in Japan, where
policy makers have been under fire for unfairly seeking to give
their economy a shot in the arm by bringing down the value of the
yen. The statement "properly recognizes that steps we are taking to
beat deflation are not aimed at influencing currency markets," said
Taro Aso, the Japanese finance minister.
But a Group of 20 official said that the statement was meant to
warn Japan not to target its exchange rates in its efforts to lift
its moribund economy, and that concerns about Japan's policies and
the prospect of competitive currency devaluation would be a major
topic at a coming G-20 meeting in Russia.
The statement and conflicting follow-ups from economic officials
and finance ministries around the world caused significant confusion
on Tuesday, with some market participants interpreting them as
quelling fears of a so-called currency war and others interpreting
them as stoking them. The yen climbed against the dollar and the
euro as officials aired their concerns about Japan's policies.
In a statement, the G-7 nations said they would consult closely
to avoid moves that could hurt stability. But they restated a
commitment to market-determined exchange rates.
"We reaffirm that our fiscal and monetary policies have been and
will remain oriented towards meeting our respective domestic
objectives using domestic instruments, and that we will not target
exchange rates," the G-7 said in the statement, which was posted on
the Web site of the Bank of England.
Concerns had been mounting in recent weeks about the effects of
an ultraloose monetary policy in Japan that has pushed the yen lower
against major currencies. The yen's weakness also had prompted talk
of a so-called currency war if other parts of the world followed
suit in a competitive devaluation.
Some international economic officials have brushed off the
growing accusations of unfair or competitive currency manipulation.
"This increasing talk of currency wars is very much overblown,"
said Olivier Blanchard, the chief economist at the International
Monetary Fund, in January. …