Would Japan Violate G-7 Currency Agreement?

By Ian Talley

Would?Kikuo Iwata, nominated to be one of?Bank of Japan?s next deputy governors, push the central bank to violate the G-7 currency agreement reached last month as authorities do ?everything possible? to beat deflation?

He might.

The Group of Seven last month promised ?our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.?

That, said U.S. Under Secretary for International Affairs?Lael Brainard?Tuesday, means the group clearly ruled out ?the pursuit of macroeconomic accommodation through the purchase of foreign assets, which does not contribute to advancing global demand.?

But only using domestic tools may be too restrictive for Mr. Iwata.

The Japanese government?s pick for the next Bank of Japan governor,?Haruhiko Kuroda, told a parliamentary confirmation hearing Monday he would do ?everything possible to get ourselves out of deflation.? Although he gave fewer clues than some in the market sought, he said the BOJ isn?t doing enough ?in terms of the size of its asset purchases or the range of assets being bought said wanted.?

Then Tuesday, Mr. Iwata, seen by some as the brains behind Japanese Prime Minister Shinzo Abe?s push for a much more muscular monetary easing, told parliament he?s open to the idea of foreign-bond purchases by the BOJ.

Continue reading on Real Time Economics.

Source: http://blogs.wsj.com/japanrealtime/2013/03/06/would-japan-violate-g-7-currency-agreement/?mod=WSJBlog

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