Business Blog Posts

Prime Minister Naoto Kan said Tokyo wanted to cooperate with its Group of Seven peers on currencies, but in the same breath reiterated the message that the authorities would take "decisive steps" if needed.

Global policymakers have been clashing over the dollar's broad-based decline, with emerging economies stepping up efforts to cap rises in their currencies, which developed nations argue could derail the economic recovery.

Some warn that trade protectionism could soon follow if tensions are not eased.

China, which has rebuffed calls from the West to let its currency rise faster, allowed the yuan to firm on Friday to its highest against the dollar since a revaluation in July 2005.

Traders said Beijing may be making some concessions to external pressure but any further rise will be limited so as not to harm its exports.

The Japanese authorities, who are also worried a strong yen would hit its vital export sector, intervened in the market for the first time in six year last month, drawing criticism from its peers.

Finance Minister Yoshihiko Noda noted that competitive currency devaluations were bad for the global economy, but defended Japan's action saying it was aimed at stopping excessive moves and not a signal it will guide the yen to a specific level.

"We are approaching a G7 meeting, but regardless of this, Japan will take firm measures, including intervention, when needed," Noda told reporters when asked about the yen's rise to another 15-year high on Thursday. "This is Japan's basic stance."

The International Monetary Fund will kick off its twice-yearly meeting with the World Bank in Washington later on Friday. G7 finance ministers will hold a closed-door dinner also later in the day while a breakfast of broader G20 finance chiefs is also scheduled.

"CURRENCY WARS"

Officials from developing markets say ultra-low interest rates in rich countries are fuelling massive fund flows into their markets, pushing up their currencies and inflating prices of stocks, property and other assets.

To limit the rise in their currencies, nations from South Korea to Brazil have moved to restrain capital flows or relied on market intervention, fanning fears that such isolated actions could escalate into devastating "currency wars."

In addition to calls from the United States on China for a stronger yuan, European Commission officials said on Thursday that the European Union would keep pressing China to revalue the yuan.

Beijing, however, argues that a steep rise in its currency was neither in China's or the world's interest.