Finance ministers from G20 states meet in Moscow for the first time tomorrow hoping to push forward a stuttering global economic recovery without slipping into a destructive “currency war” of devaluing currencies to boost national economies.

The troubles of the debt-ridden euro zone will for the first time in several international meetings not be centre stage and the main concern is expected to be Japan’s controversial plan for “monetary easing” to boost its economy.

The two-day G20 meeting, being hosted by Russia for the first time as it holds the presidency of the world’s leading economies, is also a chance for Moscow to present itself as a reliable global economic player.

Russia has set itself the task during its presidency —— which will culminate in the G20 summit from September 5-6 in Saint Petersburg —— to launch a “new cycle of growth” through investment, transparency and regulation.

But the challenge is huge —— the world economy is still only recovering from the devastation wreaked by the 2008 economic crisis and the euro zone debt woes. The International Monetary Fund (IMF) has revised down its global growth prediction for the year to 3.5 per cent.

But the room for manoeuvre is extremely limited with interest rates already at record lows and budgetary rigour the order of the day.

Economists fear that currency devaluations —— making the national currency cheaper to stimulate activity —— could prove too tempting if governments see no other way out.

“At times of zero rates and high budget deficits, the temptation to resort to this tool certainly increases,” said economist Marco Valli of Unicredit.

Under heavy pressure from new Prime Minister Shinzo Abe and his ruling Liberal Democratic party, Japan’s central bank last month announced plans for monetary easing which immediately pushed down the yen.

The Japanese answer to the US policy of quantitative easing —— the buying by the central bank of bonds held by banks to increase the quantity of money in the economy —— would be aimed at helping Japan reach an inflation target of 2.0 per cent after years of deflation.

An appreciation of the euro as market sentiment improves could also be damaging for the extremely fragile economy in the euro zone.

The G7 group of nations —— including Japan —— issued a statement last Tuesday to calm markets by declaring a commitment to “market-determined exchange rates“.

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