While Switzerland hasn’t seen armed conflict since the Sonderbund civil battles of 1847, it may be home to the latest round of the global currency war this week.
Japanese Economy Minister Akira Amari is pledging to use a trip to the Swiss ski resort of Davos to explain his nation’s new economic policies to international lawmakers and economists attending the World Economic Forum’s annual meeting.
Amari, appointed last month, is among those in Prime Minister Shinzo Abe’s fledgling government trying to play down the suspicion elsewhere that the world’s No. 3 economy wants to devalue the yen in a bid to boost exports and inflation for its moribund economy.
The currency is down 7 percent against the dollar since the start of December on the bet that’s precisely what Japan is up to, although the yen climbed Monday after the country’s central bank delayed open-ended asset purchases until next year, disappointing investors who anticipated more imminent action at the behest of Abe.
Bundesbank President Jens Weidmann was the latest policy maker from overseas to reveal qualms about Japan’s strategy, which has included consideration of foreign bond-buying.
“Until now, the international monetary system has come through the crisis without rounds of competitive devaluations,” Weidmann said Jan. 21. “I very much hope it stays that way.”
While Weidmann will be absent from Davos, Bank of Canada Governor Mark Carney and European Central Bank President Mario Draghi will be here and may have something to say on the topic. To be fair, Japan is not alone: host-nation Switzerland also has been acting to restrain its sky-high franc.
“This year’s annual gathering in Switzerland might well prove to be very interesting,” said Neil Mellor, a foreign exchange strategist at Bank of New York Mellon Corp. in London.