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Japan to seek G7 accord to curb yen

TOKYO: Japan is reported to be seeking an accord among the Group of Seven major powers, meeting in Tokyo this weekend, to curb its currency because of fears the strong yen could jeopardise its economic recovery.

Japanese officials are expected to stress the need to hold down the yen at the closed-door meeting of deputies of G7 finance ministers and central bank chiefs, the Nihon Keizai Shimbun reported on Saturday.

The deputies, convening at the start of Japan's presidency of the powerful club, are preparing their bosses' meeting here on January 22.

Japan will urge its G7 partners Ñ Britain, Canada, France, Germany, Italy and the United States Ñ to hammer out the accord by the end of the January 22 meeting, the influential financial daily said.

The yen, which soard to around 101 to the dollar earlier this week, had eased to about 105 by the end of the week following yen-selling intervention by the Bank of Japan on Tuesday.

But "the yen has not reached levels that are good enough for a smooth economic recovery," Vice Finance Minister for International Affairs Haruhiko Kuroda, who is chairing this weekend's meeting, told the Nihon Keizai.

Japan hopes the yen will stabilise between 105 and 110 to the dollar, the daily said.

Tokyo is concerned that a much stronger currency could choke off exports, one of the key props to the Japanese economy as it emerges from its longest downturn since World War II. Japan has laid out billions of dollars in a bid to galvanise sluggish economic growth, and has also enacted the world's first "zero-rate policy" on interest rates to ward off deflation.

The Nihon Keizai said Japan this weekend would "stress the need to correct the yen's strength and reiterate its policy of keeping the present zero-interest policy until deflationary concerns are wiped out."

"It hopes that the discussion (this weekend) will lead to a confirmation of cooperation at the G7 finance ministers' meeting." At their Washington meeting in September Japan's G7 partners said they shared its concern about the yen's strength but shied away from concerted action to cheapen it against the dollar.

Instead they called on Tokyo to do more to stimulate domestic growth, including sticking to the zero-rate policy and injecting more yen into the market to stem its rise.

German finance ministry undersecretary Caio Koch Weser said on Friday that he and his colleagues would focus on "exchange rate issues ... and on what has been achieved last year," including any progress on plans to reform the international financial architecture.

Weser told a briefing at the Germany embassy in Tokyo that he and his colleagues would also help prepare for a G7 finance ministers' meeting in Fukuoka, southern Japan, on July 8.

Japan is to host a Group of Eight summit, bringing together the leaders of the G7 and Russia, from July 21 to 23 on the southern Japanese island of Okinawa. The question of reforms to the international financial system, whose inadequacies were blamed by many for sparking the 1997 Asian financial crisis, was raised in June at a Cologne G8 summit.

The G7 would also discuss the Cologne agreement on an accelerated initiative aimed at cutting some 70 billion dollars in nominal terms off the 214-billion-dollar debt burden of the world's 40 poorest nations, Weser said. AFP