Japan Urges China to Allow Faster Yuan Gains (Update1)
By Keiko Ujikane
Dec. 2 (Bloomberg) -- Japanese Finance Minister Fukushiro Nukaga urged Chinese leaders at a meeting in Beijing to allow their currency to appreciate at a faster pace, joining calls from governments in Europe and the U.S.
Nukaga and five other Japanese ministers met with Chinese officials including Vice Premier Zeng Peiyan yesterday.
``I have asked China to consider letting the yuan rise at the fastest possible pace,'' the minister told reporters after the so-called High-Level Economic Dialogues. ``The Chinese side responded that it will deal with the issue with flexibility.''
European officials visiting China last week said a stronger yuan would help tame inflation that's running at the highest rate in a decade, and shrink its trade surplus. China's Premier Wen Jiabao said China would stick with a policy of ``gradualism.''
Group of Seven finance ministers and central bankers meeting in Washington in October singled out China, saying it should make the yuan more flexible to help resolve global trade imbalances.
The yuan has risen about 10 percent against the yen and 12 percent versus the dollar since China scrapped a peg to the U.S. currency in July 2005. The Chinese yuan, which is now linked to a basket of currencies, has fallen about 7 percent versus the euro.
``China should gradually move toward a free exchange rate,'' said Xinyi Lu, chief strategist of the international treasury division at Mizuho Corporate Bank Ltd. in Tokyo.
`Improving Flexibility'
Japan welcomes China's policy of ``improving flexibility of the Chinese currency,'' according to a joint communiqué released late yesterday in Beijing. The talks were organized in April by Japan's then Prime Minister Shinzo Abe and China's Wen.
China will use a combination of monetary policy measures to step up lending controls and ensure steady and balanced growth, Finance Minister Xie Xuren said at the same economic meeting yesterday.
``We will continue to take gradual steps to increase the flexibility of the currency exchange system and strengthen the independence of the currency policy and adjustment mechanism,'' Xie said, in comments posted today on the Commerce Ministry's Web site.
Nukaga, who met European Central Bank policy maker Christian Noyer in Tokyo on Nov. 27, says China's strong economy and expanding trade surplus merit more yuan flexibility.
The Chinese economy, the biggest contributor to world growth, expanded 11.5 percent in the third quarter, increasing pressure for faster appreciation and higher borrowing costs to curb inflation. Consumer prices rose 6.5 percent in October from a year earlier, matching a decade high in August, a government report showed last month.
ECB President Jean-Claude Trichet said on Nov. 28 it is in China's interest to let its currency rise faster.
