The G7 group of the world's richest nations have issued a statement to address measures by Japan to reduce the value of the yen could escalate into a beggar thy neighbor policy whereby nations devalue their currencies to make exports cheaper. The G7 said exchange rates should be set by market forces, not deliberately manipulated.
The joint statement from G7 finance ministers and central bank governors reaffirmed the "longstanding commitment to market determined exchange rates" and pledged to "consult closely in regard to actions in foreign exchange markets".
It added: "We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate."
G7 sources said the statement had been aimed squarely at Japan, although Tokyo insisted it had backing from the US, Germany, Britain, France, Canada and Italy to continue taking measures to reflate its economy. These have included the announcement of additional quantitative easing (QE) and fresh fiscal stimulus, which have led to a sharp fall in the yen.