Finance ministers of the G20 major economies will meet on Friday amid anxiety that a currency war is looming.
The meeting in Moscow, between finance ministers who represent countries accounting for 90pc of the world's GDP, looked likely to be dominated by sparring over Japan's policies that have driven down the value of the yen.
Japan's huge round of fiscal and monetary expansion is aimed at raising the rate of inflation to 2pc. The yen has fallen by around 20pc since November (Xetra: A0Z24E - news) , sparking a rally in Japanese stocks that, the government hopes, will jump-start growth by encouraging savers to spend and companies to invest.
With the US, Britain and the eurozone all implementing loose monetary policy, some emerging market exporters have sounded the alarm over ' currency wars' that they fear will devalue their foreign reserves and hurt their competitiveness.
Before flying to Moscow, Bank of Japan Governor Masaaki Shirakawa defended the monetary expansion, saying it was aimed at reviving the economy - which shrank in the fourth quarter - and not at weakening the yen.
Three days ago, the Group of Seven leading economies pledged not to engage in currency wars in an attempt to avert a potentially dangerous round of devaluations by central banks.
Finance ministers and central bank governors issued a joint statement promising that their fiscal and monetary policies would “not target exchange rates” and that it would be up to the market to determine currencies’ levels.
Amid escalating tension over currency policy, the G7 said: “We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.”
The statement was also a clear warning to nations against devaluing their currency to promote growth. “We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” the statement said.
But, their show of unity was quickly undermined by off-the-record briefings critical of Japan.
European Central Bank President Mario Draghi said in Moscow that loose talk on currencies was "inappropriate, fruitless and self-defeating".
He declined to say whether the euro's exchange rate was appropriate but noted it was in line with long-term averages in nominal and real terms.
Francois Hollande, president of France, last week called for a weaker euro and urged the eurozone to set a mid-term target for its exchange rate.
Before hosting the meeting in Moscow, Russia's finance minister Anton Siluanov said that the G20 should adopt more “specific” language opposing exchange-rate interference in a statement to be released on Saturday.
Russia's finance "sherpa", deputy finance Minister Sergei Storchak, said the drafting discussion was proving difficult, but the final text would not single out Japan for criticism.
"There is no competitive devaluation, there are no currency wars," Storchak told reporters. "What's happening is market reaction to exclusively internal decision making."
Currency is likely to be high on the agenda at the Moscow meeting, but a row was also brewing between Europe and the United States over extending a promise to reduce budget deficits beyond 2016. A pact struck in Toronto in 2010 will expire this year if leaders fail to agree at a G20 summit in St Petersburg in September.