German Chancellor Angela Merkel waded into a burgeoning debate about currency wars on Thursday, singling out Japan as a source of concern following recent moves by its central bank to quicken the pace of money printing.
Central bankers in advanced countries, notably Japan and the US, have been pursuing aggressive action to reflate their economies. This has the effect of weakening their currencies.
“I am not completely without worry,” Merkel said at the World Economic Forum in Davos, when asked whether currency manipulation risked distorting competition.
“I don’t want to say that I look toward Japan completely without concern at the moment,” she added.
“It is recognized that in Germany we are of the opinion that central banks are not there to clean up political bad decisions and a lack of competitiveness,” she said.
The Bank of Japan is under pressure from the country’s new Prime Minister Shinzo Abe to take bolder action to overcome deflation and lift the economy out of recession.
In recent months it has expanded its asset-buying program and this week it doubled its inflation target to 2 percent.
The head of Germany’s Bundesbank joined other central bankers this week in warning about the risk of competitive devaluations — countries encouraging their currencies to weaken in order to boost the attractiveness of home-grown products.
Jaime Caruana, general manager of the Bank for International Settlements, told Reuters Insider television in a Davos interview that central banks were coming under “excessive pressure” to promote growth and weaken currencies.
Merkel said it was important for central banks to set limits, as she said the European Central Bank (ECB) had done in announcing its own bond-buying program last year that is conditional on economic reforms.
“Central banks, too, will not be able to solve structural problems that stem from political decisions. They can build bridges,” Merkel said.
“The European Central Bank has contributed to this but the ECB has also made clear, only those who implement structural reforms and accept conditionality, can hope for our support,” she added.
She said politicians in Europe now had an obligation to act, as the ECB had bought them time.
The 58-year-old German leader appeared to reject suggestions by other officials at Davos that Europe’s austerity drive had gone far enough. She said politicians sometimes needed the pressure of a crisis to push through difficult reforms.
“My conclusion is therefore that if Europe is in a difficult situation today, we must implement the structural reforms today so we can live better tomorrow,” she said.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is