WASHINGTON Feb 21 Concerns over the sharp
depreciation of the Japanese yen are overstated and the Bank of
Japan should act more forcefully to reflate its economy, the
International Monetary Fund said in a report to the Group of 20
published on Thursday.
The report, which was circulated among G20 finance officials
in Moscow last week, said a doubling of Japan's inflation target
to 2.0 percent and a switch to open-ended asset purchases were
steps in the right direction. But more is needed, such as
substantially expanding the asset purchase program.
The G20 meeting was marked by concerns over a possible
"currency war" after comments by Japanese officials on Feb. 8
that the yen had weakened more than intended, suggesting the
authorities were targeting a specific value.
It said the U.S. dollar had depreciated modestly "toward
The IMF said economic activity across the globe was slow to
pick up despite an improvement in financial market confidence,
boosted by measures in Europe to tackle its debt crisis and
last-minute efforts in the United States to avoid the "fiscal
"Lead indicators suggest that real activity will strengthen
only gradually, as easier financial conditions take time to
transmit to the broader economy," the IMF said.
It said policymakers could not afford to become complacent,
especially in the euro zone where more progress is needed toward
a banking union and greater fiscal integration.
It urged the United States to quickly reach a deal to avert
automatic, deep spending cuts known as "sequestration" at the
end of this month, warning that any delays could roil markets.
"If a resolution is not found, confidence in U.S.
policymakers could rapidly erode, with potentially large
spillovers to the rest of the world," the IMF said.
It said fiscal consolidation in advanced economies, where
governments are struggling to boost growth, should proceed at a
"gradual and sustained pace.
In emerging economies, the IMF cautioned that expected
weaker growth could force cutbacks in investment and capital
outflows, reducing short-term growth prospected.
It said some emerging economies could afford to maintain
current monetary policy or ease if risks to the outlook
increase, while others may have to gradually tighten financial
Brazil should begin unwinding monetary stimulus as its
economy strengthens to ensure inflation expectations remain well
anchored, the IMF added.