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Japan Finance Minister Relieved G-20 Heat Is Off

Reported by Steve Sedgwick, Written by Katie Holliday
Sunday, 17 Feb 2013 | 3:34 AM ET
No Yen Manipulation at Play: Finance Minister
As a weak yen drives Japanese stocks higher, CNBC's Steve Sedgwick asked Japan's Finance Minister Taro Aso if he believed the G-20 endorsed Tokyo's domestic stimulus plans.

Japan's Finance Minister Taro Aso has told CNBC he was satisfied that the Group of 20 (G-20) nations "understood" that his country was not trying to artificially manipulate its currency.

In an exclusive interview with CNBC on the sidelines of the G-20 meeting of finance ministers and central bankers in Moscow, Aso said the communique released seemed to validate Japan's motives for its recent economic policies, but added that this does not represent an endorsement.

(Read More: G-20 Defuses 'Currency War,' Japan Off the Hook)

"It is hard to say whether the communique is an endorsement of Japan's economic policies," said Aso. "There has been an argument that the Japanese policy might lead the yen to become weaker, but I think the overall understanding gained at this time is that this has not been the case."

Japan's Finance Minister Taro Aso
Kiyoshi Ota | Bloomberg | Getty Images
Japan's Finance Minister Taro Aso

The G-20 nations on Saturday declared that there would be no 'currency war,' effectively letting Japan, which has been criticized for its expansive policies that have driven down the yen, off the hook. The yen has weakened by almost 21 percent against the greenback since mid-November, following the new Japanese government's radical moves to reflate the economy.

(Read More: What Currency War? Move Along, G-20 Leaders Say)

"Japan has repeatedly tried to explain that Japanese policies are taken to overcome deflation and, by all means, these are measures to overcome deflation as well as recession. That's what has been said in the second paragraph of the communique," added Aso.

Volatility Concerns

When questioned about the recent breathtaking rally in the Japanese stock market and its potential of destabilizing the economy, Aso admitted he would have preferred a slower and steadier progression.

Prime Minister Shinzo Abe's radical new economic policies, referred to as "Abenomics," and expectations of a bold monetary policy have prompted Japanese shares to surge almost 32 percent in the last three months.

(Read More: Aso: Yen Has Weakened More Than Intended)

"It is always desirable to see stable stock prices. No one welcomes the jumping up and down of stock prices. This is not desirable for the Japanese economy," he said.

But Aso noted an encouraging trend: that investor sentiment seemed to be driving the recent stock market performance, a factor that has not been so influential in the past.

"Until this particular decision was made [Abenomics], we were wondering that even if a new government was formed there might not be sudden growth. But this time around, it turns out that sentiment went ahead of what was happening... it has been a pleasant surprise on our part that [investor] mentality played in this way and pushed the economy ahead," he said.

Masaaki Shirakawa, governor of the Bank of Japan
Haruyoshi Yamaguchi | Bloomberg | Getty Images
Masaaki Shirakawa, governor of the Bank of Japan

BOJ Governor

Aso also outlined to CNBC his ideal candidate for the role of Bank of Japan governor. He said the candidate needed to be "clever and smart", with a strong understanding of both domestic Japanese economic policy and international relations.

(Read More: An Aggressive Bank of Japan Sooner Than You Think)

Abe is close to selecting his nominee for governor of the Bank of Japan and a decision could come in the next few days, Reuters has reported. The current BOJ governor Masaaki Shirakawa announced earlier this month that he will step down on March 19, three weeks before his term was due to end. The news sparked speculation of a more aggressive BOJ, as Abe has made it clear that he would like to see Shirakawa replaced by someone with a more dovish bent.

"We can't place someone who has no experience in running a large organization in this important position... The current state of the BOJ is different to the BOJ of the past, because nowadays it is on par with the likes of the Federal Reserve or the European Central Bank," he said.

"The governor of the BoJ is likely to attend international conferences once a month attended by finance ministers and central bank governors, which means that perhaps that person should speak a foreign language," Aso said.

Names put forward as possible candidates to replace Shirakawa include president of the Japan Center for Economic Research Kazumasa Iwata, chairman of the Daiwa Institute of Research Toshiro Muto and Asian Development Bank President Haruhiko Kuroda. Iwata and Muto were both former deputy governors between 2003 and 2008.

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