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Officials at Davos warn of currency war
January 25, 2013, 4:04 pm


German Chancellor Angela Merkel at the World Economic Forum in Davos. [Xinhua]

As Japan, Europe and the US trade accusations over who is to blame for a currency war, German Chancellor Angela Merkel has fired the latest salvo, which could worsen the crisis.

Finance ministers from a number of G8 and developing countries, including Russia from BRICS, say the gradual devaluation of the yen since September is being manipulated to give Japanese exports an advantage.

That means Japanese imports – of everything from German and US automobiles to other manufactured good – will become more expensive, pushing the consumer to buy locally made products.

Japanese officials have rejected the charge saying that the yen’s nearly 13 per cent drop is merely a correction from already too-high levels.

But at the sidelines of the World Economic Forum in Davos, Switzerland on Thursday, Merkel responded to questions about currency manipulation by saying she was worried about the Bank of Japan’s actions.

“I don’t want to say that I look towards Japan completely without concern at the moment,” she told journalists. “It is known that in Germany we are of the opinion that central banks are not there to clean up political bad decisions and a lack of competitiveness.”

Earlier in the week, German officials had hinted at possible retaliation against the Bank of Japan but offered no further details.

On Friday, Japanese officials fired back saying the Bank of Japan adopted monetary policy to ease deflation and rejected accusations of currency manipulation.

“The criticism of currency manipulation is misplaced,” Finance Minister Taro Aso said at a news conference.

Source: Agencies