WASHINGTON (Reuters) - U.S. Treasury Secretary Jack Lew said on Friday it was important for Group of Seven major economies to reinforce pledges to refrain from competitive currency devaluations at their meeting next week, adding that also applied to the United States.
Lew also said he would continue to work to support the dollar’s status as the global reserve currency, saying it was “the definition of safety.”
“We have exhorted countries to adhere to the commitments that we’ve made for the G7 and G20, because if other countries start moving toward competitive devaluation, it will start a chain reaction,” Lew said at a Christian Science Monitor media breakfast. “If country A does it, country B will do it and country C will do it, and pretty soon you’re battling over shares of a shrinking global pie.”
Asked about recent comments from expected Republican presidential nominee Donald Trump that the strong dollar was a problem for the U.S. economy, Lew said the dollar’s strength was a result of stronger growth in the United States.
“The answer is for other economies to strengthen,” he said, adding that this would allow markets to achieve a better equilibrium in currency valuations.
Lew said Japan has relied too heavily on monetary policy and needed to focus more on boosting domestic demand and pursuing structural reforms to make its economy more efficient. He added that his views have not changed on Japan’s currency policies since a G20 meeting in April, when he told Japan’s finance minister that markets were “orderly” despite a rising yen and urged them to honor Japan’s G20 currency commitments.
Regarding China, where he will travel in early June for the U.S.-China Strategic and Economic Dialogue meetings, Lew said he would continue to press Beijing to reduce excess industrial capacity that is distorting world markets.
“We’ve made progress, we will continue to make more, but it’s going to require ongoing engagement” with Beijing, he said.
Lew also said he will emphasize at the May 20-21 G7 finance ministers and central bank governors’ meeting in Sendai, Japan, the need to avoid a “dramatic crisis” over Greece’s bailout terms as debt repayment deadlines approach in July.
Lew reiterated the U.S. view that there needs to be more debt relief for Athens, and that European demands for fiscal savings are too high, adding: “there will have to be some give in these conversations.”
“Particularly at a time when you’re approaching a vote in the UK on Brexit, it would be a very unfortunate moment to have another round of high-wire negotiations on Greece,” Lew said.
Reporting by David Lawder; Editing by Chizu Nomiyama and Meredith Mazzilli