Bank of Japan Governor Haruhiko Kuroda issued a plea on Saturday for leaders of major economies to step back from a tariff war, and said stable currency markets were to everyone's benefit. Kuroda spoke on arrival at a meeting of Group of 20 finance leaders, in response to questions on assertions from US President Donald Trump that Europe and China were manipulating their currencies in favour of their economies.
"It is most desirable for currencies to move stably and reflect economic fundamentals," Kuroda said. "This is something we have already reached agreement about at Group of 7 and at G20 (level)." Kuroda also sent hoped debate at the G20 would lead to an easing of retaliatory tariff increases between the United States and China.
"Trade protectionism poses merits to no one involved. I think restraint will eventually take hold," he said. Trump has broken with precedent in his presidential role in recent days with comments criticising the dollar's strength and the monetary policies of the US Federal Reserve and central banks in China and Europe.
He tweeted on Friday that Fed rate hikes were taking away the US' "competitive edge" in exports. Trump's comments have sparked concern that currencies will become a new battle ground in the simmering trade war. But, arriving in Buenos Aires, US Treasury Secretary Steven Mnuchin told reporters that Trump was not trying to intervene in currency markets.
The subject is particularly sensitive for Japan because its central bank, under Kuroda's leadership, has pursued a massive quantitative easing programme to spur inflation. After five years of easing, the BoJ's attempts to push up inflation have produced minimal results.
But the yen has steadily weakened, which could lay Japan open to criticism from its trading partners. The United States this month imposed 25 percent tariffs on $34 billion of Chinese goods to lower the US trade deficit, and China quickly retaliated with an increase in tariffs on US goods.
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