The Group of 20 nations will not single out Japan over the weak yen and will disregard a call from G7 powers not to use economic policies to target exchange rates, according to a communique drafted for finance leaders meeting in Moscow.
A G20 delegate who has seen the draft – prepared by finance officials for their bosses - also said it would make no direct mention of new debt-cutting targets, something Germany is pressing for but which the United States wanted struck out.
If adopted by G20 finance ministers and central bankers meeting in Moscow on Friday and Saturday, Japan will escape any censure for its expansionary policies which have driven the yen lower and drawn demands for action from some quarters.
“There will not be a heavy clash aboutcurrencies in the end, because nobody can risk such a negative signal,” said another G20 delegation source.
The currency market was thrown into turmoil this week after the G7 – the United States, Japan, Germany, Britain, France, Canada and Italy – issued a joint statement stating that domestic economic policy must not be used to target currencies, which must remain determined by the market.
Tokyo said that reflected agreement that its bold monetary and fiscal policies were appropriate but the show of unity was shattered by off-the-record briefings critical of Japan.
The G20 draft merely sticks to previous language on the need to avoid excessive currency volatility, the delegate said.
The yen has fallen by around 20 per cent since November. Having firmed earlier on Friday, it turned tail and dropped about 0.6 per cent against the dollar and euro in response to the communique details.
“Although this week has been marked by volatility surrounding G7 and G20, it appears the path to currency weakness will remain intact following those events,” said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.
One senior G20 source said any reference to targeting exchange rates was not acceptable to China, which is the world’s No. 2 economy and holds much of its $3.3 trillion in foreign reserves in US Treasury bonds.