Japan's efforts to seek informal consent to act against an unwelcome yen rise bore little fruit, with the United States offering a cool response to concerns voiced by Tokyo that the currency's gains are too sharp and may justify intervention.
A lack of G-20 sympathy for Tokyo's appeal may embolden yen bulls to test the currency's 17-month highs against the dollar hit earlier this month, keeping Japanese policymakers on edge to contain the damage on a fragile, export-reliant economy.
U.S. Treasury Secretary Jack Lew said on Friday he did not see any disorderly moves in the currency market, a day after his Japanese counterpart Taro Aso conveyed to him Tokyo's "strong concern" over what it saw as "one-sided" yen rises.
"At a time of slow and uneven global growth, avoiding beggar-thy-neighbor exchange rate policies is particularly important," Lew said in a statement to the International Monetary Fund's steering committee on Saturday.
"Surplus countries especially have a responsibility to adopt stronger adjustment measures to avoid reliance on the exchange rate to support demand," he said, signaling that Washington was in no mood to allow Tokyo to conduct yen-selling intervention.
In a communique issued on Friday, the G20 finance leaders maintained a warning on countries to refrain from competitive currency devaluation and signaled that markets have calmed from the past few months of turbulence.
The G-20 also reiterated that excess currency volatility was undesirable, but only after heavy lobbying by Japanese delegates who want to use the language to justify stepping into the market if they see yen gains as excessive.
Tokyo won't be engaging in competitive currency devaluation as long as any yen-selling intervention is brief and aimed at smoothing abrupt yen rises, a senior Japanese finance ministry official told reporters after the G-20 gatherings.
European Central Bank officials share Japan's unhappiness over the dollar's weakening, though they accept it as a natural consequence of the Federal Reserve's cautious economic outlook and see no reason to act to weaken the euro.
Others also did not see broad dollar falls as a concern.
"We are in a situation where the world is working its way through a lower commodity price scenario and that's where we'll have countries that are exporters have (their currencies) tend to decline, and those that import ... tend to rise," Bank of Canada Governor Stephen Poloz said on Friday.
Credit Suisse sees a high bar to direct currency intervention by Japan.
"It is hard to call the current market a dysfunctional one that requires the BOJ to provide entry into yen positions at reasonable prices via intervention," it said in a research note.
With its hands tied on intervention, the government may lean on the Bank of Japan to deploy another blow of monetary stimulus as early as its next rate review on April 27-28.
BOJ Governor Haruhiko Kuroda waded into the currency debate to describe past yen rises as "excessive," and reiterated his pledge to take additional monetary easing steps if yen moves hurt the economy.
While many BOJ officials are wary of acting again so soon after having deployed negative interest rates in January, Kuroda may be ready to pull the trigger, some analysts say.
U.S. economist Nouriel Roubini, who claims to have spoken to Japanese central bankers, signaled on Friday the BOJ may be nervous enough about the yen's rise to ease even before the April meeting.
"I don't think it's going to happen, but if the dollar were to keep on weakening and the euro and yen keep appreciating... they may have to act earlier because this is becoming a serious issue."
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