Global finance chiefs signaled Japan has scope to keepstimulating its stagnant economy as long as policy makers ceasepublicly advocating a sliding yen.

The message was delivered at weekend talks of finance ministersand central bankers from the Group of 20 in Moscow. While theypledged not “to target our exchange rates for competitivepurposes,” Japan wasn't singled out for allowing the yen to dropand won backing for its push to beat deflation.

“There was no censure of the Japanese attitude, which wasconsidered a policy to develop its economy and not to intentionallydevalue,” Brazilian Finance Minister Guido Mantega told reportersafter the meeting.

The yen extended its losses against the dollar today as PrimeMinister Shinzo Abe told parliament that buying foreign bonds is amonetary policy option and the law governing the central bank maybe revised if it fails to get results. Investors are focused on thechoice for a successor to Bank of Japan Governor Masaaki Shirakawa,who steps down next month, with Abe vowing to signal thegovernment's intentions through his pick.

“Abe should be able to continue his push for monetary easing,”said Hiroaki Muto, senior economist at Sumitomo Mitsui AssetManagement Co. in Tokyo. “Foreign bond purchases by the BOJ may bea difficult policy to implement, however, as it could beinterpreted as currency intervention.”

The Japanese currency was 0.5 percent weaker at 2:21 p.m. inTokyo at 93.97 per dollar. Stocks rose, with the Topix Indexgaining 2.1 percent to rebound from its first weekly loss sinceNovember.

Japanese officials in Moscow denied driving down their currency,arguing that its weakness was a byproduct of their effort to revivethe world's third-largest economy, which would benefit tradingpartners.

The yen has fallen more than 13 percent in the past three monthsas Abe campaigned for looser monetary policy to boost an economyplagued by 15 years of deflation. Since Abe won elections inDecember, the BOJ has agreed to a 2 percent inflation target and tomake open-ended asset purchases from 2014.

“If they do not take responsibility and produce results, we mustpush ahead with the BOJ law change,” Abe said today in parliament.He said that buying foreign bonds “exists as one idea” for monetarypolicy.

The prime minister has to announce his nominees for a newcentral bank governor and deputies by March 9, Deputy Chief CabinetSecretary Hiroshige Seko said on public broadcaster NHKyesterday.

Standard & Poor's today reaffirmed Japan's sovereign debtrating, saying that Abe's polices will be “critical” to stop aprolonged decline in the nation's credit standing. The rating waskept at AA-, the fourth highest level, with a negative outlook,

“It will take a while for exports to increase on the back of aweaker yen,” said Tomo Kinoshita, an economist with Nomura HoldingsInc. in Tokyo, which today reaffirmed a forecast it made on Feb. 14for a 2 percent expansion for Japan's economy in the fiscal yearstarting April.

The government estimates an expansion of 2.5 percent next fiscalyear. Gross domestic product shrank an annualized 0.4 percent inthe last quarter, the Cabinet Office in Tokyo said on Feb. 14.

The Bank of Japan's measures “have been and will remain”targeted at achieving a “robust economy through stable prices,” BOJGovernor Masaaki Shirakawa said in Moscow. The G-20 statement is“absolutely in the same spirit of our monetary policy,” hesaid.

Yen, Stocks

Finance Minister Taro Aso said today in parliament that theyen's fall and gains in stocks are a result of monetary policy,declining to comment on foreign exchange. In the same parliamentarysession, Abe said there's no reason to make specific comments onthe currency.

Australian Treasurer Wayne Swan told Bloomberg Television thatmeddling with currency values hurts economic growth.

“Market-based exchange rates, fiscal and monetary policiessupporting jobs and growth — that's the core of the G-20 agenda,”Swan said. “To have people artificially target their exchange ratescompletely repudiates that approach.”

Canadian Finance Minister Jim Flaherty said talk alone of acurrency war was “contributing to the uncertainty that is holdingback stronger growth.”

The Japanese defense echoes that made by U.S central bankersagainst criticism from emerging-market officials such as Brazil'sMantega for stimulus that has then undermined the dollar and liftedother currencies.

In a nod to such complaints, the G-20 members agreed to monitorand minimize any “negative spillovers” and said that monetarypolicy should always be aimed at domestic needs, according to astatement issued after the talks wrapped up on Feb. 16.

Developed nations should “pay attention to the effects theirmonetary policies have on external markets,” Chinese Vice FinanceMinister Zhu Guangyao told the state-run Xinhua news service fromMoscow.

Federal Reserve Chairman Ben S. Bernanke said Feb. 15 in Moscowthat the U.S. has deployed “domestic policy tools to advancedomestic objectives,” adding that bolstering the U.S. economy willsupport world growth.

Still, unlike their American counterparts, Japanese officialsincluding Abe have commented publicly on their currency's exchangerate, fanning speculation that they welcome its fall and that theyen's weakness plays a part in their recovery strategy.

Appropriate Level

Japanese ruling-party lawmaker Kozo Yamamoto, who is close toAbe, in a Feb. 14 interview said that it would be “appropriate” forthe yen to trade at about 95-100 to the dollar. Deputy EconomyMinister Yasutoshi Nishimura said on Jan. 24 that it wouldn't be aproblem if the exchange rate reached 100.

U.S. Treasury Undersecretary Lael Brainard used a speech inMoscow to criticize “loose talk about currencies.”

“What's best for the Japanese government is to stop makingcomments on the level of foreign exchange rates,” said YoshikiyoShimamine, chief economist at Dai-Ichi Life Research Institute inTokyo. “Yen depreciation is an unavoidable side effect of easymonetary policy. It's desirable to just leave the currency marketalone.”

The G-20 also said that while the risks to the world economyhave receded, growth remains too weak and unemployment is too highin many countries.

Given the concern about the outlook for global growth, advancednations accepted a U.S. proposal not to set new fiscal targets toreplace those they agreed on in 2010 and which many of them are oncourse to miss. They promised instead to develop “crediblemedium-term fiscal strategies,” according to the statement.

The group also pledged to work together to curb multinationalcompanies' leeway to shift profits to low-tax countries, endorsingan initiative spearheaded by the U.K, France and Germany.

The G-20 meeting finished after a week of volatility infinancial markets that started when the Group of Seven rich nationssaid on Feb. 12 that its members won't use policies to “targetexchange rates” and would focus on domestic needs. Confusion thenbroke out as G-7 officials bickered over whether their first jointcomment on currencies since 2011 implied irritation with Japan.

The yen fell on Feb. 15 for the first time in four days as earlydrafts of the G-20 statement failed to echo the G-7's vow. It waseventually added alongside a reiteration that countries will move“more rapidly” toward market-determined exchange rates and “refrainfrom competitive devaluation.”

Currency tensions may persist. Japan's monetary push willprobably force “many other central banks to remain or become evenmore expansionary in order to prevent excessive exchange rateappreciation,” Joachim Fels, chief economist at Morgan Stanley inLondon, said in an e-mail yesterday.

European Central Bank Vice President Vitor Constancio hintedthere is a limit to patience with market moves.

Exchange rates moving in one direction for a long period “wouldof course raise questions and would then have to be discussed,” hesaid on Feb. 16.

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