(Bloomberg) -- Japan stressed the need for countries to pay closer attention to excessive movements in the currency market at the Group of 20 meeting, according to the Vice Finance Minister for International Affairs.
“We pointed out the need for greater caution regarding excessive volatility in the foreign exchange market driven by speculation, and the spillover effects of continued high interest rates in some countries,” Masato Kanda told reporters Thursday. He was speaking after the first day of the G-20 finance ministers and central bank governors meetings in Rio de Janeiro, Brazil.
The top currency official said that Japan also emphasized the importance of taking appropriate actions regarding the currency market in line with existing G-20 commitments. The G-20 agreement notes that excessive volatility and disorderly movements in exchange rates can negatively impact economic and financial stability.
Kanda’s comments follow the yen’s recent sharp gains as traders increasingly bet on the Bank of Japan raising interest rates along with the announcement of a bond-buying cut next week. The currency rallied more than 1% earlier this week after hovering at its lowest level against the dollar since the 1980s for about a month. The central bank is scheduled to announce its latest policy decision on July 31, with more than 90% of economists surveyed by Bloomberg seeing the risk of a rate hike.
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The Federal Reserve, which is set to hold its meeting on the same day as the BOJ, is expected to likely hold off from cutting rates amid stronger-than-expected economic data. Japan also raised concerns about the risk of prolonged high interest rates in some countries, warning that such conditions could harm the real economy and destabilize financial and capital markets, according to Kanda.
The finance ministry official added that many G-20 peers saw a higher chance of a soft landing for their economies, while there were still significant downside risks, including wars and excessive public and private debt. “We will monitor the economic situation with a great sense of urgency and will take appropriate actions if necessary,” he said.
--With assistance from Fran Wang.
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