Adviser to Japan PM defends depreciation of yen

PTI Washington | Updated on February 16, 2013

An economic adviser to Japanese Prime Minister Shinzo Abe has defended a policy of monetary “independence” as Tokyo fends off charges that it is manipulating the yen.

The yen’s value has fallen sharply since Abe was elected in December, a depreciation that has come under scrutiny as finance ministers and central bankers from the Group of 20 major economies meet in Moscow.

Koichi Hamada, a Yale University professor who helped craft the premier’s “Abenomics” philosophy, stood by his advocacy of “international monetary independence” in which top priorities include job growth — not exchange rates.

“Monetary policy should be assigned to its own price level, not the exchange rate, but the price level and unemployment, and then the world will be led to a kind of better state,” Hamada said yesterday at the Peterson Institute for International Economics in Washington.

“Monetary policy of one country is assigned to its own country and not for others,” he said, warning against the so-called “beggar thy neighbour” effect in which one nation’s economic policy hurts other countries.

Under pressure from Abe, the Bank of Japan has aggressively expanded buying of assets, a policy of “monetary easing” that has led to a fall in the yen’s value. A weaker yen benefits Japanese exporters by making their products less expensive overseas.

The International Monetary Fund has said that fears of a global currency war were overblown, but some European officials are expected to take Tokyo to task during the two-day meeting in Moscow over what they see as manipulation.

Japanese policymakers have denied any orchestration of the yen’s fall and said that monetary easing was aimed at bringing growth and overcoming deflation, a persistent concern in the world’s third largest economy.

Hamada, a former lawmaker from the ruling Liberal Democratic Party, serves as a special adviser to Abe on economic policy and is the father of Defence Minister Yasukazu Hamada.

Published on February 16, 2013

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