TOKYO (MNI) – International Monetary Fund Managing Director
Christine Lagarde warned on Friday that a deeper debt crisis in Europe
would trigger safe-haven buying of the yen and make the currency even
more overvalued.

She told a news conference that she will stick to the IMF’s latest
view that the yen is “moderately overvalued in the medium term” and
added that worsening developments in Europe would “have an welcome
currency effect on the yen,” with safe-haven flows making it “further
overvalued.”

Lagarde repeated the IMF’s position that Japan’s currency market
intervention aimed at preventing a sharp yen rise from hurting the
economy can be justified if “macro-prudential measures have been taken
and have been exhausted” and if such action is “duly concerted with all
the colleagues.”

Earlier in her speech at a forum here, Lagarde said the IMF will
revise down its assessment of the global economy in an update to its
World Economic Outlook issued in April.

“In the IMF’s updated assessment of the world economy, to be
released 10 days from now, the global growth outlook will be somewhat
less than we anticipated just three months ago. And even that lower
projection will depend on the right policy actions being taken,” she
said.

Asked to comment further on this point, the IMF chief said that the
projections will be “tilted to the downside” and added that the change
is “not an enormous variation but a negative variation.”

She said some regions are more affected by the recent slowdown in
global demand than others but declined to name them.

On news of rate cuts by the European Central Bank and the People’s
Bank of China on Thursday, Lagarde said she was not sure whether the
moves were coordinated but that central banks share the goal of
enhancing economic growth.

Lagarde was here to inspect security, traffic and accommodations in
central Tokyo where the IMF and World Bank will hold their meetings in
October.

She said she discussed global, eurozone and Japanese economic and
policy issues with Prime Minister Yoshihiko Noda, Finance Minister Jun
Azumi and Bank of Japan Governor Masaaki Shirakawa during her visit.

tokyo@marketnews.com
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