By Bernard Hickey
Prime Minister John Key has acknowledged concern about the Bank of Japan's announcement of unlimited money printing and the risk of currency wars globally.
But he says there is little New Zealand could do because any move towards money printing here would be unlikely to drive the New Zealand dollar lower.
"Of course that's a concern if people are engineering a lower exchange rate through effectively fiscal easing policies," Key told a post-cabinet news conference in Wellington when asked about the Japanese move.
"But what can NZ do about that? Any country that embarks upon printing money has to think through the ramifications of that," Key said.
The Bank of Japan yesterday announced plans for unlimited money printing to buy government bonds from next year in an attempt to drive the yen lower and boost exports. Bundesbank President Jens Weidmann warned this could trigger competitive devaluations that some have termed 'Currency Wars'.
"In the case of Japan they've had very low levels of inflation and that hasn't been their problem for a very long period of time," Key said.
"I still think from NZ's perspective we're on the right path. Printing money wouldn't necessarily see a devaluation of our exchange rate," he said.
Key pointed to a series of interest rate cuts in Australia had not led to a lower Australian dollar.
"Their exchange rate has appreciated, not depreciated. There isn't necessarily a straight correlation. In the US there's been a lot of different factors driving that," he said.
"In the end it's (currency wars) a risk. It sits in that whole basket of issues, which is that the global economy is still not fully healed," he said.
"That's one of the risks we face, that the US can't deal with its fiscal cliff issues, or there's problems in Europe or Asia. We're in better shape than we probably were at the beginning of 2012 globally, but we're not out of the woods."