Japan stimulus gets G20 green light

Updated: 2013-04-22 07:14

By Bloomberg News in Washington (China Daily)

  Print Mail Large Medium  Small 分享按钮 0

Bank of Japan Governor Haruhiko Kuroda won international endorsement of his stepped-up stimulus push, saying it emboldened him to press ahead with his campaign to defeat 15 years of deflation.

Alert to signs of a slowing global economy, Group of 20 finance chiefs and central bankers on April 19 praised this month's measures by the BOJ aimed at delivering 2 percent inflation within two years. They signaled Japan's focus on supporting domestic demand was strong enough to allow them to ignore the side effects on their own economies of a sliding yen.

"Winning international understanding gives me more confidence to conduct monetary policy appropriately," Kuroda told reporters after the meeting in Washington. "We will continue our qualitative and quantitative easing for the next two years to achieve the 2 percent price stability target."

The backing of Japan accompanied a G20 warning that the world economy was weakening again as officials acknowledged that "much more is needed" to reinforce it. They intensified pressure on the euro area to escape recession, pressed ahead with steps to stop crops-border tax evasion and disagreed over how to rededicate themselves to cutting debts.

Repeating their promise of February to refrain from "competitive devaluation" without singling out Japan for criticism, the group of key industrial and emerging economies indicated an acceptance of the BOJ's plan to double its monetary base through bond buying even if it undermines the yen.

The currency has declined 20 percent in the past six months and fell for a fourth day against the dollar on Friday to 99.52 at the end of New York trading. The currency slid to 99.95 on April 11, the weakest level since April 2009.

"The global hope is that inflation will drive growth in Japan, finally awaking this sleeping giant," said Douglas Borthwick, managing director and head of foreign exchange at Chapdelaine FX, a unit of Tullett Prebon Plc, in New York. "Japan has the green light."

A weaker yen helps Japanese exporters such as Mazda Motor Corp, the Japanese automaker with the highest proportion of exports, and Sony Corp, which gets 70 percent of its revenue outside the country. Still, an excessive decline could fuel trade tensions.

Japanese officials used the Washington talks to outline their reflation strategy and deny it is aimed at the yen. Finance Minister Taro Aso said the yen's fall is a "byproduct" of policies aimed at ending the "slow-motion death" of deflation and that the G20 understands that.

In a nod to concerns that stimulus in one country can create challenges elsewhere by forcing up other exchange rates and propelling capital flows, the G20 said it will "be mindful of unintended negative side effects stemming from extended periods of monetary easing."

South Korean Finance Minister Hyun Oh Seok said the cheaper yen remains a "concern" for his economy and urged advanced nations to prepare for an orderly exit from quantitative easing programs. German Finance Minister Wolfgang Schaeuble noted easy monetary policy is no "substitute for the necessary" reforms to Japan's economic structure.

By contrast, Brazilian Finance Minister Guido Mantega, who coined the term "currency war" in 2010 to describe the negative spillover of rich nation stimulus on emerging markets, praised Japan's efforts to end deflation as a "daring move" worth celebrating.

(China Daily 04/22/2013 page14)