The Group of Seven (G7) major world economic nations have attempted to reassure investors that they will not engage in currency wars in an effort to avert a round of devaluations by central banks.
In a statement the G7 members, comprising the US, UK, France, Germany, Italy, Japan and Canada pledged to “consult closely” on any action in the foreign exchange (FX) markets.
“We, the G7 ministers and governors, reaffirm our longstanding commitment to market-determined exchange rates and to consult closely in regard to actions in FX markets,” read the statement.
“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 statement added that “excessive volatility and disorderly movements in exchange rates can have adverse implications”.
As a member of the G7, Japan is regarded as supporting the statement despite the Bank of Japan’s (BoJ) announcement last month of
and the Japanese governments ¥10.3 trillion
economic stimulus package
. Reports suggest that a meeting of the larger Group of 20 (G20) finance ministers and central bankers in Moscow later this week could see Japan criticised for its stimulus programme. The dynamic between what was once the leading engine of global growth, the G7, and what is now, the G20, will be fascinating to see.
France’s president, Francois Hollande, has also departed from the G7’s line by calling for a weaker euro and urging the eurozone to set a mid-term target for its exchange rate.
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The central bank has tweaked its stimulus programme and is making a fresh effort to push Japan’s inflation rate above its 2% target.