G7 bid to calm currency war fears

The Group of Seven nations is considering releasing a statement on exchange rates this week to calm concern the world is on the brink of a currency war, said three officials from G7 countries.

Finance officials from the world’s major industrial economies have drafted a text now under review by senior policymakers, one official said. The current wording, which may be changed, contains commitments to market-set exchange rates and an agreement that governments do not use fiscal or monetary policy to drive currencies, the official said.

Japanese prime minister Shinzo Abe’s push for more aggressive monetary policy has raised concern abroad that his government is directly seeking to weaken the yen, something it denies. In the talks, Japan has questioned the statement’s contents because it does not want to be singled out for criticism, said another official from a G7 nation.

The G7 is looking to release the statement before a meeting this Friday and Saturday in Moscow of finance ministers and central bankers from the Group of 20, which includes the G7 and emerging markets such as Brazil, China, and India. Any pledge not to target currencies when setting policy would mark a strengthening in stance from when the G7’s finance chiefs last commented on currencies as a group in Sept 2011.

The Wall Street Journal earlier reported the G7 was debating a statement.

A Japanese government official who asked not to be named said only that the G20 nations, including those from the G7, have been in contact ahead of meeting in Russia.

The yen has weakened about 13% against the dollar since mid-November in anticipation of monetary stimulus advocated by Abe, who took office in December. His campaign has drawn statements of concern from Germany to Canada as officials fret a weaker yen could harm their exporters.