MOSCOW Jan 16 Japan is acting to weaken its
currency and there is a danger that others will follow suit and
foster a round of destabilising devaluations, Russian central
banker Alexei Ulyukayev said on Wednesday.
"We're on a threshold of a very serious, confrontational
actions in the sphere that is known ... as currency wars," the
central bank's First Deputy Chairman told reporters.
Russia holds the G20 presidency this year, a forum at which
currencies and their relative values is likely to surface.
"The recent decision by the new government of Japan
regarding very protectionist monetary policy ... this is a
course towards a sharp depreciation of the yen," Ulyukayev said.
"Other colleagues from respected central banks and
governments already pursue this policy. This is not a path
towards global coordination but a separation."
Since coming to power late last year, Japanese Prime
Minister Shinzo Abe has kept up a drumbeat of pressure on the
central bank to deliver bolder monetary easing.
The euro rose to its highest in 20 months against the yen
this week as Japanese officials ramped up pressure on the Bank
of Japan to ease monetary policy aggressively and weaken the
That may have prompted Jean-Claude Juncker, head of the
Eurogroup of euro zone finance ministers, to tell business
leaders on Tuesday that the euro was "dangerously high".
He did not elaborate but his comment took the wind out of
the euro's sails on Wednesday even though European Central Bank
Governing Council member Ewald Nowotny said he did not share the
concern and Germany's economy minister said he did not see the
euro as overvalued.
Despite years of global economic stress, a currency race to
the bottom has so far been a dog that hasn't barked,
notwithstanding howls of pain from emerging markets who could
face more of the same as Japan quickens its pace of money
The Federal Reserve, the Bank of England and the European
Central Bank have all cut interest rates close to zero and
flooded their banking systems with cash to try to restore
confidence and encourage investors to buy riskier assets.
Meanwhile, the Swiss National Bank has successfully capped
the rise of the Swiss franc for about 18 months.
As newly minted cash pours into emerging economies in search
of higher yields, either their exchange rates will rise, making
exports less competitive, or they will have to cut interest
rates and/or intervene to hold down their currencies. That could
fuel credit and asset price booms that sow the seeds of
Bank of England Governor Mervyn King, approaching the end of
his tenure, warned late last year that too many countries were
trying to weaken their currencies in a way that could create
problems in 2013.
The Bank of Russia left monetary policy unchanged on Tuesday
and sounded a relatively hawkish note on inflation. Ulyukayev
said rates could be moved as early as next month.