Japan backs G7 stand on yuan

Japan supports sending a "collective message" to China at a G7 meeting next month to allow more flexibility in the yuan, a government official said yesterday.

China has come under heavy pressure from the Group of Seven leading industrialised nations to revalue its currency, which some economists say is kept artificially low, giving it a unfair export advantage and hindering more balanced economic growth.

The remarks by Rintaro Tamaki, Japan's Vice-Minister of Finance for International Affairs, echoed concerns expressed by a senior Canadian official on Monday who said he would like to see the yuan move more freely.

The Canadian official said he expected finance ministers to discuss foreign exchange rates at the meeting but added they will not issue a communique.

Canada is hosting the February 5 to February 6 talks.

"It's a collective message to China," Tamaki said on the sidelines of the Asian Financial Forum in Hong Kong when asked about the response to China over the yuan. Tamaki's remarks had little impact on markets but offered additional evidence that Japan stands with other G7 members to press China on the issue, one trader in Tokyo said.

China has continually shrugged off pressure from its major trading partners to let the yuan appreciate, repeating its line that stability was in everybody's interests. Reform of China's exchange rate policy will be gradual, as exports will likely to take a long time to return to pre-crisis levels, said the country's commerce minister.

The disagreement has highlighted the failure of big countries to resolve currency tensions which were thrown into focus by the global economic crisis.

However, moves by China's central bank to tighten liquidity and cool rapid economic growth have stoked expectations that Beijing may allow the yuan to appreciate.

 

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