Calls for a stronger Chinese currency have been muted among finance leaders gathering for talks among the Group of 20 rich and developing nations.
Japan said Group of Seven talks on Thursday evening did not address the Chinese yuan, suggesting the United States had not pressed its case among other rich nations for a freeing up of the currency in response to growing domestic political pressure.
The broader G20 forum has gone softly in past meetings on pressuring China for swift action on the yuan, which some economists say is 40 percent undervalued, with governments judging it more productive to prod Beijing privately.
There was no sign of a radical change of path from the group's members as they gathered in Washington on Thursday.
Japan played down the topic and warned against pushing Beijing on currency flexibility, even as International Monetary Fund chief Dominique Strauss-Kahn pointed to a stronger yuan as one of several measures to help fix global trade imbalances.
"This issue is a big problem for the United States and China, but I think that the G20 countries will refrain from openly discussing this topic," Japanese Finance Minister Naoto Kantold reporters on Thursday.
After a working dinner of G7 finance ministers and central bankers, Kan said there was no discussion of the Chinese yuan or financial regulation at the G7 meeting because most of the time was spent discussing Greece's debt troubles.
Shocked by the financial crisis, global leaders have set out to address the imbalances in the world economy, which most economists say largely come down to enormous trade surpluses run by some countries, the most visible being China.
South Korea, host of this year's G20 summit in November, said it can mediate between China and its trade partners, including the United States.
"Conditions in China are such that, even in China's own interest, there are voices within China urging an appreciation of the renminbi," Shin Hyun Song, a senior economic adviser to President Lee Myung-bak told Reuters.
NO CHANGE
Japan and South Korea have been among the very few G20 countries to speak up on the yuan so far.
Brazil's central bank governor said earlier this week it was "critical" that China's currency should appreciate for the good of the global economy. And his Indian counterpart was quoted as saying the yuan should strengthen.
Bank of Japan Governor Masaaki Shirakawa said exchange rates should not be used as a tool to fix trade imbalances, while Kan warned that openly pressuring China on currency flexibility would not work.
"It is inappropriate to use forex rates as a tool to solve trade disputes," Shirakawa told reporters upon arriving in Washington on Thursday.
"Each country should also guide policy with the aim of achieving economic stability. This goes for currency rate policy, too," he said.
Criticism of China's yuan policy has been strongest in the United States and markets are watching closely a debate over whether to label a currency manipulator — potentially triggering a rise in trade tariffs on Chinese goods.
Japan has tried to persuade Beijing that a stronger yuan will help curb inflation and benefit China's economy, and signs of movement from officials have led markets to price in a small gain in the yuan's value over the next year.
