In a concerted move to quiet fears of a so-called currency war, finance officials from the world's largest industrial and emerging economies expressed their commitment on Saturday to "market-determined exchange rate systems and exchange rate flexibility."
In a statement issued at the conclusion of a conference here of the Group of 20, the finance ministers from the Group of 20 promised: "We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes."
In its statement, the group also vowed to "take necessary collective actions" to discourage corporate tax evasion, particularly by preventing companies from shifting profits to avoid tax obligations. For instance, a number of big American companies, including Apple and Starbucks, have come under scrutiny recently for seeking out the friendliest tax jurisdictions.
Over all, the statement largely echoed one last week by seven top industrial nations pledging to let market exchange rates determine the value of their currencies. Currency devaluation can be used to gain competitive advantage because it makes a country's exports cheaper.
"We all agreed on the fact that we refuse to enter any currency war," the French finance minister, Pierre Moscovici, told reporters at the conference, which was held in a meeting center just a short walk from the Kremlin and Red Square.
In the statement on Saturday, the Group of 20 pointedly avoided any criticism of Japan, where stimulus programs backed by Prime Minister Shinzo Abe have kept interest rates near zero and flooded the economy with money -- leading to a roughly 15 percent drop in the value of the yen against the dollar over the last three months.
The Japanese policies, which have reduced the cost of Japanese products around the world, were the primary cause of fears of a currency war.
In essence, the Group of 20 expressed a view that loose monetary policy, including steps that weaken currency values, are acceptable when used to stimulate domestic growth but should not be used to benefit in global trade.
Critics of that view say that it amounts to a distinction without a difference because loose monetary policies stimulate growth and bolster exports at the same time.
The United States has also used a loose monetary approach to aid in the economic recovery, in the form of "quantitative easing" by which the Federal Reserve buys tens of billions of dollars in bonds each month.
Source: The New York Times | DAVID M. HERSZENHORN