G20 meets amid 'currency war' fears

on 15/02/2013 12:35:21

Finance ministers are meeting in Moscow today amid fears a "currency war" is brewing among the world's major nations.

The G20 forum gets under way as tensions mount over Japan's monetary policy and as there are increasing concerns other countries with struggling economies may seek to devalue their currencies to boost trade and trigger growth.

Japan, which remains mired in recession, has come under fire over measures taken by its new government to revive the economy, which have been driving down the yen and making it more competitive.

The G7 group of nations issued a joint statement on Tuesday reaffirming "our longstanding commitment to market-determined exchange rates" and saying they would "not target exchange rates".

But the show of unity failed to ease fears over Japan's tactics.

Today's G20 meeting comes as many economies remain in recession, with figures yesterday showing another unexpected contraction in Japan as its gross domestic product (GDP) fell 0.1% in the three months to the end of December.

Gloomy data out yesterday also showed the eurozone fell deeper into recession in the fourth quarter after GDP fell 0.6% in its sharpest contraction since the height of the financial crisis in early 2009.

Germany, France and Italy also saw their economies shrink more than expected.

The difficulties faced by many economies is leading to worries they will try to devalue their currencies, as a weak currency makes goods cheaper to overseas buyers and can therefore boost exports.

It also serves to increase overseas profits from companies.

There have been particular concerns for Europe after the euro has risen by 6% against a basket of major currencies in the past six months, which risks making its goods less competitive at an already difficult time for the 17-nation bloc.