Bloomberg News

G-7 Ministers Agree Exchange Rates Market-Driven, Official Says

February 13, 2013

All Group of Seven finance ministers accept that foreign exchange rates are set by markets and are not policy goals to be addressed by political leaders, a German government official said.

There was no disagreement among the finance ministers nor at working level that the market’s primacy in determining exchange rates was the core message of the G-7 statement released by the U.K. yesterday, the official told reporters in Berlin today on condition of anonymity because the negotiations were held in private.

The wording of yesterday’s statement was close to those issued before by the G-7 and G-20 and he hopes it puts an end to exchange-rate discussions, the German official said.

Japan will be in the spotlight at a G-20 gathering in Moscow that starts on Feb. 15 amid concern in Germany and elsewhere that the yen’s slide has been excessive.

In their statement, G-7 finance ministers and central-bank governors appeared to signal acceptance for a weaker yen so long as Japanese Prime Minister Shinzo Abe’s government doesn’t actively pursue devaluation.

That position was then challenged when an unidentified official from a G-7 nation issued a clarification saying the group was concerned about excessive moves in the yen and Japan’s practice of giving guidance on its value. Japanese Vice Finance Minister Takehiko Nakao declined to comment today on the official’s remarks.

Tumbling Yen

The yen appreciated 0.2 percent to 93.31 per dollar as of 10:21 a.m. in London after gaining 0.9 percent yesterday. It reached 94.46 per dollar on Feb. 11, the weakest since May 2010. Japan’s currency has tumbled 18 percent in the past three months, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

Abe’s Liberal Democratic Party swept to power in elections in December on a campaign to beat deflation and weaken the yen. Currency depreciation makes Japan’s products cheaper overseas, boosting the competitiveness of exporters including Toyota Motor Corp. and Sony Corp.

Germany will push for G-20 members to curb rising debts because economic growth is hurt by investors losing faith in governments’ ability to make repayments once debt reaches certain thresholds, the official said in Berlin. Germany wants follow-up goals to those agreed at a G-20 leaders’ summit in Toronto in 2010, including a commitment to balance budgets by 2020.

The U.S. will push back against calls for further fiscal austerity at the Moscow meeting, Treasury Under Secretary for International Affairs Lael Brainard said Feb. 11. at a briefing in Washington. Strengthening demand rather than trimming budgets must be given priority, Brainard said, adding that a “premature shift to restraint” would jeopardize the recovery.

In Toronto, G-20 leaders agreed that advanced economies would commit to fiscal plans that would at least halve deficits by 2013 and stabilize or reduce government debt-to-gross domestic product ratios by 2016, a goal the euro region will deliver on, the German official said. Russia wants the G-20 to amend country-specific medium- and long-term public debt.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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