U.S. Treasury Warns of Japan's "Over-Reliance" on Monetary Easing

Washington, April 9 (Jiji Press)--The U.S. Treasury Department warned of Japan's "over-reliance" on monetary easing in a semiannual report on international economic and foreign exchange polices on Thursday. "Over-reliance on monetary policy and an excessive tightening of fiscal policy will put Japan's recovery and escape from deflation at risk, and could generate negative spillovers," the report said. "As such, Japan's medium-term deficit reduction targets should be sufficiently flexible to respond to weakness in domestic demand growth," it added. The Treasury report pointed out that sluggish private spending in Japan following the consumption tax hike in April 2014 was "more persistent than the government expected." The report urged the Japanese government to "support a recovery driven by domestic demand while redoubling efforts to promote meaningful structural reforms necessary to raise long-term growth in Japan." In the report, no country was deemed to be manipulating foreign exchange rates. It emphasized the Group of 20 commitments to "move more rapidly toward market-determined exchange rate systems" and "refrain from competitive devaluation." Still, the report said the Chinese yuan "remains significantly undervalued." Meanwhile, the dollar's effective rate, which reflects real purchasing power abroad, is well below its peak in the early 2000s even after rising 11.4 pct over the nine months through the end of March, the report noted. The report urged South Korea to reduce currency market intervention. END