KYOTO, Japan (MNI) – Top financial policymakers from the
Asia-Pacific Economic Cooperation forum on Saturday endorsed the latest
Group of 20 initiative to let market forces set foreign exchange rates
more and avert a race to make currencies weaker to gain an export edge.

APEC finance officials from the U.S., Japan and other advanced
countries as well as emerging economic powers including China and Russia
also backed the G20 accord to build a framework for correcting large
external imbalances at a gradual pace without using a single
quantitative target.

“We will move towards more market-determined exchange rate systems
that reflect underlying economic fundamentals and will refrain from
competitive devaluation of currencies,” the APEC finance ministers said
in a joint statement after their one-day meeting here, repeating the
pledge made by the G20 finance ministers and central bank governors
last month.

“Advanced economies, including those with reserve currencies, will
be vigilant against excess volatility and disorderly movements in
exchange rates. These actions will help mitigate the risk of excessive
volatility in capital inflows facing some emerging economies.”

Japanese Finance Minister Yoshihiko Noda, who chaired the weekend
meeting, told a joint news conference that while the APEC ministers
didn’t discuss any quantitative targets for reducing current account
imbalances, they shared basic understanding toward working on the issue
in a multilateral context.

U.S. Treasury Secretary Timothy Geithner explained about the
common objectives: “We are trying to make sure, as the world economy
recovers, that future growth is sustainable and we don’t see re-emerge
the type of excess in balances on the trade side, whether they are
surpluses or deficits. It could threaten future growth and threaten
future financial stability.”

He said the APEC is seeking to “build the framework for closer
cooperation among emerging and developed countries on these questions so
we bring about a more orderly, smoother, more gradual adjustment to the
big transition we are seeing around the world.”

On the exchange rate front, Geithner said APEC is trying to build a
framework to help defuse tensions and the pressure prevalent across the
global markets and to “provide more stability among major currencies.”

The APEC ministers noted the major global challenge: aggressive
credit easing by Japan, the U.S. and Europe to support their economic
recovery and fight deflationary pressures are prompting investors to
move away from low-interest countries toward higher-yielding securities
in emerging economies.

“The global economy is recovering from the recent financial crisis,
but uncertainty remains. Growth in the region is uneven across the
economies, with developing economies experiencing a strong recovery,
while advanced economies are recovering more slowly,” they said.

“Net capital flows have returned in a significant volume to
emerging economies of the region, raising the risk of capital flow
volatility and increases in asset prices in some economies. Financial
reforms are proceeding and we should continue to take steps to build a
stronger and more resilient global financial system.”

“We remain committed to maintaining open markets and fighting
protectionism. We reaffirmed our common resolve to support the recovery
in a collaborative and coordinated way.”

Noda said aging populations are posing a threat to fiscal stability
among not only advanced economies but also many emerging economies.

“Ensuring sound fiscal management and instituting a credible and
growth-friendly fiscal consolidation plan form an indispensable part of
our growth strategy. Improving the efficiency of public finance
management supported by medium-to-long term budget planning is also
important,” the APEC ministers said.

tokyo@marketnews.com
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