Japan rejects yen manipulation claims

(MENAFN- AFP) Japan's Finance Minister on Friday rejected claims Tokyo was orchestrating a slide in the yen, a day after German leader Angela Merkel voiced concern over the new government's exchange rate policy.

"The criticism that (the government) is manipulating the currency rate is completely off the mark," Taro Aso told a regular press briefing in the Japanese capital.

His comments were the latest in a simmering row over Japan's currency, with critics saying Tokyo's pressure on the central bank for aggressive policy action amounted to meddling that could spark a global currency war.

On Tuesday, the Bank of Japan (BoJ) announced an open-ended easing plan and a two-percent inflation target to stoke growth, a move widely seen as bowing to political pressure.

"I will admit I am not without some concern about Japan right now," Merkel told top business and political leaders at the World Economic Forum in Davos on Thursday.

She added that "political influences or manipulations of the exchange rate" have become a hot topic within the Group of 20.

The yen hit record highs against the dollar in late 2011 -- sitting around 75 to the greenback -- and remained strong through much of last year, hammering Japanese exporters as the country struggled to recover from the March 11, 2011 quake-tsunami.

But the unit has tumbled in recent months, since Shinzo Abe promised as opposition leader before December's election that he would urge the bank to be more aggressive in its battle to save the economy.

Abe swept to power in the poll and has since moved to bring BoJ policies into line with his new government's position, at one point warning he would alter the law guaranteeing the bank's independence it it did not follow suit.

The yen weakened again Friday, with the dollar buying 90.83 yen, against 90.40 yen in New York, while the euro was at 121.97 yen against 120.91 yen.

Aso's comments came as his economic revitalisation minister Akira Amari was quoted by Dow Jones Newswires as saying he would like to meet Merkel in Davos this weekend "to explain our position so there won't be any worries at all".

In an interview published Thursday Takehiko Nakao, vice minister of finance for international affairs, told the Wall Street Journal "Japan has no intention whatsoever of competitive devaluation of the yen".

Japan should not be criticised if well-intentioned monetary policy "has a certain impact on exchange rates as a consequence", he said.

Financial authorities were watching currency markets and would take "appropriate action if necessary", he added, without elaborating.

Under heavy pressure at home, Japanese authorities have intervened in currency markets in recent years to temper the unit's rise, with little success and stoking criticism abroad.

Other critics of the latest move include the head of the US Federal Reserve Bank of St. Louis, a Russian central banker who warned over a global currency war, and Jens Weidmann, the head of Germany's Bundesbank.

On Monday, Weidmann said the result of government interference in central bank policies, citing Japan as an example, "could be a much stronger politicising of exchange rates".

"Up to now the international monetary system has weathered the (financial) crisis and avoided a devaluation race and I hope very much that will remain the case," he said.

The monetary easing policies undertaken by the central banks of numerous industrialised countries -- predominantly the US Federal Reserve -- during the crisis have also tended to lower the value of their currencies.

A number of emerging nations such as Brazil were unhappy and spoke of a situation in which nations actively work to bring down the value of their currencies.

China has been a regular target of criticism that it manipulates the value of its yuan currency to prop up the export-heavy economy.