The financial chiefs of the Group of Seven countries indicate that they may tolerate a sliding Yen for the time being as they are intensifying their focus on the recovery strategy of Japan. As stated by the Chief Economist of Japan Macro Advisors, Takuji Okubo, the Bank of Japan should be easing again if the current currency measures taken don’t work as they would have expected. As stated by the policy makers, they can accept the Yen’s decline through 100 per USD (This happened for the first time since 2009), as they have examined the strategy of Japan and the impact on currencies will be monitored by them as well. In 2013, Yen has experienced a decline of 15% against USD and 13% against Euro. The Bank of Japan stepped up the monetary stimulus right from end of the last year.
As mentioned by the Finance Minister of Germany, Wolfgang Schaeuble, everybody is having an eye on the exchange rate developments. Schaeuble added that he had a pretty intense discussion on Japan’s policies with the Japanese colleagues. Apart from that, the finance ministers reportedly have told the central bankers that the relatively high liquidity is making them increasingly concerned.
The latest G-7 meeting happened in a time when there are signals that the global economy is in another soft patch, yet again. The data released on Euro area showed that the region was in recession in the 1st quarter of 2013. On the other hand, a separate report showed that the retail sales in US have experienced a decline in April, for the 2nd straight month.
The officials have also agreed to crack down on the tax evasion as well. The differences on the speed of budget cutting were papered by them as they decided to restore the fiscal order with proper flexibility.
The Group of 7 meeting was used by Haruhiko Kuroda, the Governor of the Bank of Japan, to reiterate that the doubling of the monthly purchases was made to meet the inflation target of 2% by the end of 2015, not for helping the exporters artificially. Taro Aso, the Finance Minister of Japan, mentioned that there was no criticism made on the policies of Japan from the Group of 7 countries. They didn’t air their respective opinions on the Yen passing 100 per USD either.