It is expected that when financial chiefs of the Group 20 countries will meet this week for the 1st time after Japan, the 3rd largest economy in the world intensified campaign to beat deflation, Japan will be reminded its pledge of not driving Yen down any further. As far as US Treasuries are concerned, it has mentioned that Japan will be pressed during the meeting so that it refrains from any sort of competitive devaluation. Apart from that, the European Governments will be urging it not to become too reliant when it comes to fiscal and monetary stimulus measurements.
Incidentally, on 4th April, the Bank of Japan decided to double the monthly bond purchases and also set up a 2-year horizon for achieving the goal of 2% inflation. Incidentally, this surprised the investors big time and since then, Yen has fallen against all of the most traded peers of the same. Many investors however praised the efforts of boosting the stagnant economic growth of the country. Still many are concerned that the boost may come at an expense of the exports, as continuous slide of Yen will hurt them big time.
According to the Chief Economist of NLI Research Institute, Yasuhide Yajima, Yen is currently moving pretty rapidly and hence it is not possible for US to applaud this Asian country’s battle to end deflation in the same. Yajima added that Japan needs to show the fiscal plans for strengthening the growth of its economy. It will then be proved that the fiscal policy makers are not only depending on weakening Yen for reviving its economy.
The semiannual currency report to the Congress was used by the US Treasury to say that Japan should remain oriented towards meeting the domestic objectives with usage of domestic instruments only. Apart from that, it asked Japan to stay away from competitive devaluation and target the exchange rate for any sort of competitive purpose.
The Vice Finance Minister for International Affairs of Japan, Mitsuhiro Furusawa, on 12th April stated that the current monetary policy adopted by the Government is only aimed to get Japan out of the deflation and the officials will be properly explaining things in the Group of 20 meeting as well. Incidentally, Haruhiko Kuroda, Governor of Bank of Japan stated that Central Bank has taken all the required measurements already.