G20 shocked by Japan move – World News
Japan officially intervened today unilaterally against the yen just days before the G20 summit due to be held in France. The main factor is that governments like Japans have placed little faith in the G20`s ability to totally address the issue. Many French officials who are preparing for the beginning of the Cannes summit held on Thursday have spoken out stating Tokyo`s intervention is an unhelpful move of position that has underlined the difficulty of realizing coordinated positions within the G20 countries.
Many officials from other countries have been taken by surprise by this shift by Japan. The group of seven well off and considerably rich countries have joined in a concerted intervention with Tokyo in the past few months in an attempt to stabilize the Yen in the aftermath of the Japanese earthquake and Tsunami crisis but the Bank of Japan has seen fit to remain alone during this time. Since the last G20 summit which was held in Seoul there has been a volatile outbreak of currency wars.
The United States has attempted to round up a coalition of countries in the hope of pressuring China to allow more appreciation of the renminbi but china along with the support of other emerging markets like Brazil have said that US monetary policy was pushing upward pressure on exchange rates all over the world. With investors increasingly worried about the world economy as well as the Euro zone the unwelcome capital inflows are regarded as havens in uncertain times. The national bank of Switzerland has also shocked investors by announcing they would intervene by unlimited amounts to cease the Swiss franc rising any higher than it is currently rated. This move will appear to have succeeded as the currency holding is kept very much below the SNB`s target level which may have added extra incentive to Japan.
The task will only get harder due to this as individual countries will not favor signing up to specific pledges. Any movement that could have been hoped for by China allowing the reminbi to strengthen has been hit adversely by Japans move. Many other factors would suggest that attempts to use the G20`s summit to squeeze China to make a commitment to market based exchange rates will have less chance of success than usual. Countries with emerging markets are currently suffering currency weaknesses rather than combined strength and are less concerned by Chinese exports. The Eurozone is eager to solicit lucrative loans to resolves the current sovereign debt crisis as it has little incentive to become involved in an all out confrontation.