G20 seeks to Banish ‘Economic Warfare’ Fears
G20 finance ministers sought to convince markets at a meeting in Moscow they would not slide into “economic warfare” with competitive devaluations of currencies to boost activity. British Finance Minister George Osborne warned of the dangers of slugging out a currency war but expressed confidence the ministers would give a clear signal in their final communique that it is markets and not governments who determine exchange rates.
The worries i.e. similar to previous disputes with China; have been set off by Japan’s plan of monetary easing to boost inflation and activity by reducing the value of the yen under new Prime Minister Shinzo Abe. G20 states including Japan are expected to adopt a statement in their communique broadly similar to that issued by the G7 leading developed economies last week emphasizing markets alone should set forex rates.
European capitals fear that devaluations of currencies like the yen would make their own exports less competitive and harm extremely fragile economic recoveries at home. The G7 group of the world’s richest nations — including Japan — issued a statement this week to calm markets by declaring a commitment to “market-determined exchange rates”.
The United States has urged the world to refrain from “competitive devaluation”, a message echoed by the EU commission, France and Germany. French Finance Minister Pierre Moscovici said that all the states were agreed that there should be no currency war and there was no question of “putting pressure on this or that central bank”.