“Heading to G7, U.S. tells Japan to stick to currency rules”

By: Priscilla - May 10th 2013

Fri May 10, 2013 11:06am EDT

An employee of a foreign exchange trading company works next to a monitor displaying the Japanese yen's exchange rate against the U.S. dollar (top) and other major foreign currencies in Tokyo May 10, 2013. REUTERS/Issei Kato

By David Milliken and Leika Kihara

AYLESBURY, England (Reuters) РThe United States told Japan on Friday to stick to the rules when it came to the value of its currency, setting the stage for a potentially frank meeting of Group of Seven finance ministers outside London.

Treasury Secretary Jack Lew said Japan had “growth issues” that needed to be dealt with but that its attempts to stimulate its economy needed to stay within the bounds of international agreements to avoid competitive devaluations.

“I’m just going to refer back to the ground rules and the fact that we’ve made clear that we’ll keep an eye on that,” Lew told the CNBC news channel.

The yen hit a four-year low against the dollar earlier on Friday, beyond the psychologically important 100 yen mark. It also trades at a three-year low against the euro.

The moves were driven in part by Japanese investors shifting into foreign bonds, a move that has been expected since the Bank of Japan unveiled a massive stimulus plan.

Tokyo insisted its tumbling yen would not be a hot topic at the meeting of finance chiefs, despite revived rhetoric about a currency war.

“The Bank of Japan isn’t targeting currency rates, which are determined by the markets,” the bank’s governor, Haruhiko Kuroda, said.

Policymakers are concerned that Japan is engineering an export-led recovery that could hinder other regions’ ability to grow.