* Purchases of foreign bonds could spark currency war
* Japan dodges direct criticism at G20 summit
* Competitive currency devaluation worries still linger
By Stanley White
TOKYO, Feb 19 Japan has no plans to buy foreign
currency denominated bonds as part of a monetary easing plan,
the finance minister said on Tuesday, a sign the government
could be stepping back from more controversial proposals to end
nearly 20 years of deflation.
Japanese Prime Minister Shinzo Abe, his advisers and some
members of the Bank of Japan's policy board have floated the
idea since last year, but if implemented the move is seen as
likely to attract protest from other countries that Japan is
devaluing the yen to boost its economy at their expense.
The yen rose shortly after Aso's comments as traders
digest the news and attempt to calculate how far Japan's new
government can ease monetary policy and what effect further
monetary expansion would have on currencies and foreign
Japan avoided direct criticism of Abe's policies at a Group
of 20 summit last week, but worries linger that if Japan's
rhetoric to weaken the yen seems excessive it could spark a wave
of competitive currency devaluations that could harm the global
"I have no intention of doing this as a method to ease
monetary policy," Aso said, when asked about central bank
purchases of foreign bonds.
Aso's comments seemed intended to moderate the tone of the
debate - only on Monday Abe said buying foreign bonds was a
Aso added that for the time being the government had no plan
to revise the BOJ Law, which guarantees the central bank's
independence and determines its policy mandate.
The G20 nations, responding to feverish debate last week
about competitive devaluations between the world's economic
powers, said on Saturday there would be no currency war.