Central bank stimulus under the spotlight at IMF, G20

Wed Apr 17, 2013 1:08am EDT
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By Krista Hughes and Lesley Wroughton

MEXICO CITY/WASHINGTON (Reuters) - Global policymakers will discuss the impact of unprecedented monetary policy easing at meetings in Washington this week along with the softly-softly approach central banks will need to eventually wean the world off super-cheap funds.

The Bank of Japan has joined other major central banks in aggressive policy stimulus, pledging to inject $1.4 trillion over the next two years and fanning tensions over currency wars.

Officials preparing for Group of 20 talks on the sidelines of World Bank and International Monetary Fund meetings said Japan's stimulus would dominate discussions on the world economy, especially the repercussions on asset prices and risks of stoking speculative buying.

"Everyone is interested in a strong Japanese economy, but the repercussions of these measures and their viability need to be explored," one G20 official said on condition of anonymity.

The G20 finance ministers and central bankers would probably confirm a February pledge to avoid competitive currency devaluations, officials said. The yen hit multi-year lows against the euro and dollar after the BOJ move.

"Overall the view is that Japanese initiatives focused on the country's domestic problems go in the right direction," a euro-zone official said. "But there will be a debate on the consequences outside of Japan, including on foreign exchange rates."

The G20 will also spar over debt reduction goals, with the United States against setting targets while others back a proposal to cut public debt over the longer term to below 90 percent of gross domestic product.

A debt-cutting pact struck in Toronto in 2010 will expire this year if leaders fail to agree to extend it at a September summit of leaders. Delegates at Thursday and Friday's talks hope to at least move toward a proposal for the leaders.   Continued...

A man walks past the Bank of Japan building in Tokyo March 17, 2010. REUTERS/Toru Hanai