“The world’s major industrial nations sought to soothe mounting fears of a currency war with a pledge to avoid devaluing their exchange rates in the pursuit of stronger economic growth.
“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 Group of Seven’s finance ministers and central bank governors said in a statement released today in London.
The stance is tougher than the G-7’s last joint comment on exchange rates in 2011 and marks an effort to avoid a 1930s- style spiral of retaliatory devaluations in which weak economies try to boost exports by driving currencies down. It follows an outbreak of concern that Japan’s new campaign to beat deflation is an outright attempt to weaken the yen, an allegation its government again denied today.
The yen pared gains versus the dollar after the statement’s release and as Finance Minister Taro Aso said the G-7 acknowledged Japan is not chasing a weaker yen and that its monetary policy is aimed at reversing a decline in prices. The yen traded at 94.33 per dollar at 10:25 a.m. in London after strengthening as much as 0.5 percent.
