“Japanese ruling party lawmaker Kozo Yamamoto said a race to devalue currencies would spark global growth, dismissing German criticism of Prime MinisterShinzo Abe’s plans for monetary easing which have weakened the yen.
Yamamoto, a member of the Liberal Democratic Party who is close to Abe, said in an interview yesterday that an exchange rate of 95-100 yen to the dollar would be appropriate. The yen has fallen almost 10 percent against its U.S. counterpart since Abe’s LDP won a landslide victory on Dec. 16.
Abe has pushed the Bank of Japan to increase monetary stimulus to overcome more than a decade of deflation. While his administration argues the yen’s fall is a consequence, not a target of his policies, the decline has sparked criticism from German officials including Michael Meister, the parliamentary finance spokesman for Chancellor Angela Merkel’s party.
There is “no problem at all” with the yen falling because of monetary easing, Yamamoto said, citing the research of Columbia University professor Jeffrey Sachs and Koichi Hamada, an emeritus professor at Yale who is an economic adviser to Abe. “It contributes to the stability of the entire economy and to growth,” he said.
The yen weakened after publication of Yamamoto’s comments, before resuming gains to trade 0.4 percent higher at 92.46 per dollar as of 1:11 p.m. in Tokyo.
Germany’s Meister expressed concern in a Jan. 22 interview, saying that competitive devaluation could “create a spiral that hurts us all.” Finance MinisterWolfgang Schaeuble and Bundesbank President Jens Weidmann have also criticized Abe’s policies.
