* Japan economy minister says not trying to weaken yen
* Amari says no breach of central bank independence
* South Korea central banker criticises Japan policy
* IMF chief urges medium-term debt reduction plan
By Lisa Jucca and Kelvin Soh
DAVOS, Switzerland, Jan 26 Japan's economy
minister rejected criticism on Saturday that his country's
extraordinary fiscal and monetary stimulus programme was aimed
at weakening the yen and undermined central bank independence.
Akira Amari told the World Economic Forum in Davos it was up
to the market to determine the currency's exchange rate, and the
Bank of Japan had chosen independently to sign a joint statement
with the government on actions to fight deflation and revive
"You might think there's a deliberate policy to drive down
the value of the yen but we in government refrain from
commenting on the exchange rate of the yen," Amari said in
response to criticism of Japanese action.
South Korea's central bank governor questioned the efficacy
of Japan's easing of monetary policy and said the BOJ's decision
to start buying unlimited amounts of assets in 2014 could have
unintended long-term consequences.
"What they did created a couple of problems," Bank of Korea
Governor Kim Chong-soo told Reuters in an interview in Davos.
"One is that the level (of the currency) is affected, and the
pace of change is also a problem. They did it too hastily."
A stable exchange rate is key for the Bank of Korea, Kim
The yen has come under pressure since reports on Thursday
quoted deputy economy minister Yasutoshi Nishimura as saying the
yen's decline was not over, and that a dollar/yen level of 100
would not be a concern.
The Japanese currency is now trading around a 2-1/2
year low against the dollar at around 90 yen, as the market
remained focused on Japan's pursuit of a reflationary economic
BREAK CYCLE OF DEFLATION
Amari said the government and the BOJ had agreed on
exceptional measures because Japan had to break a prolonged
cycle of deflation and economic contraction.
Appearing on the same panel, International Monetary Fund
Managing Director Christine Lagarde refrained from direct
criticism but urged Japan to put forward a medium-term plan to
reduce its public debt after this week's measures.
"Japan has made very important decisions. We are very
interested in these policies. We would like them to complement
it with a mid-term plan on how the debt would be reduced,"
Japan's debt stood at 235 percent of gross domestic product
before new Prime Minister Shinzo Abe announced a new
deficit-financed stimulus programme this month. The BOJ said it
was doubling its inflation target to 2 percent and would take
new monetary stimulus measures.
Appearing on the same panel, Canadian central bank chief
Mark Carney, soon to take over as governor of the Bank of
England, said the Japanese policy as outlined did not breach the
Group of Seven industrial nations' policy understanding against
unilateral currency intervention.
However a European Central Bank source, speaking on
condition of anonymity, said the ECB was "not very happy" at
what was seen as a step towards competitive devaluations and the
Group of 20 major economies' finance ministers and central
bankers should address the issue next month.
"I guess this is a G20 issue that needs to be addressed
there. It is potentially dangerous and we should avoid (currency
wars)," the source said.
"It's not a problem yet. But if they (Japan) continue in
that direction and we see also what's happening with
quantitative easing in the United States and Britain, then we
would be the only one who would not follow suit.
"The risk is that this would indeed have an effect on the
exchange rate and that we would get into a dangerous situation,"
the ECB source said.