“DAVOS, Switzerland (Reuters) – Japan’s economy minister rejected criticism on Saturday that his country’s extraordinary fiscal and monetary stimulus program was aimed at weakening the yen and undermined central bank independence.
Akira Amari told the World Economic Forum in Davos it was up to the market to determine the currency’s exchange rate, and theBank of Japan had chosen independently to sign a joint statement with the government on actions to fight deflation and revive economic growth.
“You might think there’s a deliberate policy to drive down the value of the yen but we in government refrain from commenting on the exchange rate of the yen,” Amari said in response to criticism of Japanese action.
South Korea’s central bank governor questioned the efficacy of Japan’s easing of monetary policy and said the BOJ’s decision to start buying unlimited amounts of assets in 2014 could have unintended long-term consequences.
“What they did created a couple of problems,” Bank of Korea Governor Kim Chong-soo told Reuters in an interview in Davos. “One is that the level (of the currency) is affected, and the pace of change is also a problem. They did it too hastily.”
A stable exchange rate is key for the Bank of Korea, Kim added.
The yen has come under pressure since reports on Thursday quoted deputy economy minister Yasutoshi Nishimura as saying the yen’s decline was not over, and that a dollar/yen level of 100 would not be a concern.
The Japanese currency is now trading around a 2-1/2 year low against the dollar at around 90 yen, as the market remained focused on Japan’s pursuit of a reflationary economic policy.
BREAK CYCLE OF DEFLATION
Amari said the government and the BOJ had agreed on exceptional measures because Japan had to break a prolonged cycle of deflation and economic contraction.
Appearing on the same panel, International Monetary Fund Managing Director Christine Lagarde refrained from direct criticism but urged Japan to put forward a medium-term plan to reduce its public debt after this week’s measures.
“Japan has made very important decisions. We are very interested in these policies. We would like them to complement it with a mid-term plan on how the debt would be reduced,” Lagarde said.
Japan’s debt stood at 235 percent of gross domestic product before new Prime Minister Shinzo Abe announced a new deficit-financed stimulus program this month. The BOJ said it was doubling its inflation target to 2 percent and would take new monetary stimulus measures….”
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