Whatever Lola wants, Lola gets ...
WASHINGTON -- Japan, however, is a different story. Leaders of the world's No. 2 economy wanted the
Group of Seven
finance ministers to commit to a coordinated intervention to weaken the yen and help shore up Japan's slow-going recovery. Instead, the Japanese got supportive talk and a nudge toward helping themselves.
The G7, representing the world's seven largest economies and the European Union, said in a communique after its meeting here today that it "shared Japan's concern" about the yen's appreciation, which has driven the Japanese currency to the neighborhood of 104 to the dollar. The statement went beyond the bland endorsement of currency stability that some expected, but the group made clear that it expects Japan to undertake its own further stimulus measures to boost its economy:
Japan's economy has shown signs of positive growth, although prospects for continued recovery in private demand remain uncertain. In these circumstances, and in view of the yen's appreciation, the Japanese authorities reiterated their intention to implement stimulus measures until domestic demand-led growth is solidly in place and, in the context of their zero- interest-rate policy, to provide ample liquidity until deflationary concerns are dispelled. Banking-system strengthening measures, including bad-asset disposal, and structural reforms will continue to be important. We shared Japan's concern about the potential impact of the yen's appreciation for the Japanese economy and the world economy. We welcomed indications by the Japanese authorities that policies would be conducted appropriately in view of this potential impact. We will continue to monitor developments in exchange markets and cooperate as appropriate.
Despite putting a coordinated intervention off the table, the G7's stance should provide some support for the dollar vs. the yen.
Bank of Tokyo-Mitsubishi
Chairman Tasuku Takagaki, new vice chairman of the
Institute of International Finance
, said at an IIF press conference that he sees the yen reaching 110 to the dollar by Monday or Tuesday,
reported. Although he said that in the context of a call for a coordinated intervention, he noted that the forecast wasn't predicated on such a move.
At a press conference,
declined to comment on any aspect of the dollar/yen relationship or Japan's economy. "A great deal of thought and care went into the communique," he said.
Of the U.S. economy, Summers said unsurprisingly that he expected "the momentum of the expansion ... should be maintained."
Conditions Set for Further Russian Aid
The G7 also discussed the corruption-ridden debacle that is the Russian economy, pledging not back further aid to Moscow until reforms are in force:
The Russian government, in cooperation with the International Monetary Fund and the World Bank, is expected to put in place, prior to disbursement of the next IMF tranche, a system of budgetary and financial controls to ensure proper use of budgetary support from international financial institutions.
Summers said he was encouraged that the Russian
intends to push forward on money-laundering reforms.
A New G: The G20
The G7 formally unveiled a new group intended to assist developing nations, the
Group of 20
. The group includes the seven G7 nations, plus Argentina, Australia, Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey. The European Union, the IMF and the World Bank will be represented as well. The G7 opted not to include Indonesia in light of the violence continuing to rage in East Timor.
"We propose to establish a new mechanism for informal dialogue in the framework of the Bretton Woods institutional system, to broaden the dialogue on key economic and policy issues," the G7 said in its communique.
Canadian Finance Minister Paul Martin will chair the group for its first two years. The choice seems to reflect Canada's position as the world's monetary Switzerland, a role none of the other G7 nations could be said to play.
The Scene: Cheshire Cats and Befuddled Visitors
Walking into Decatur House to begin the meeting, the finance ministers were a parade of silent giants with dark suits and Cheshire-cat grins, like they knew something we, the press corps, didn't. They must have gotten the memo about the bilateral U.S.-Japan meeting that lasted 15 minutes and decided the main issue of today's ministerial meeting -- that Japan would not be getting its hoped-for intervention.
Washington should be abuzz with so many high-powered, jet-setting swells in town, except this city wasn't designed for buzz. Tourists photographing the press corps near the White House had no idea who they were snapping or why, save for the fact that this was the only evidence of action in the nation's somnolent capital. The rest of the hundreds of visiting delegations are safely shuttling between the IMF, World Bank and
A passing tourist trolley found itself besieged by bored reporters asking, "What do you think of the dollar/yen rate?" Bewildered, the tourists waved enthusiastically for the cameras.