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SCOTT SIMON, HOST:

This is WEEKEND EDITION from NPR News. I'm Scott Simon. Economies are struggling right now in many parts of the world, and central banks have responded by printing reams of money. So far, that action has been met with mixed results. This week, the Bank of Japan announced its own measures to try to stimulate that country's weak economy. Those actions are designed to try to flood the country with money and encourage businesses and consumers to spend. But the moves taken by Japan's central bank have also raised fear of a currency war. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: The Federal Reserve and other central banks have been pouring money into their financial systems for several years now in an effort to stimulate their economies. These measures haven't managed to bring back boom times, but Jacob Kirkegaard of the Peterson Institute for International Economics says things would have been a lot worse without them.

JACOB KIRKEGAARD: Together with many of the other emergency measures, they've been instrumental in avoiding that the Great Recession turn into another Great Depression. So, they basically helped us avoid the 1930s, in my opinion.

ZARROLI: The policies pursued by central banks have been controversial. A common complaint is that they are inflationary. That is, so much money is sloshing around that prices will soar once the global economy improves. Kirkegaard says that fear simply hasn't been borne out.

KIRKEGAARD: I just don't think that that is a credible argument when we still have the levels of unemployment and low-capacity utilization in general that we see in pretty much all of the industrialized world.

ZARROLI: But the controversies don't stop there. The policies being pursued by the Bank of Japan have exposed a level of friction among the world's major economies and generated talk of what economists call competitive devaluation. Here was famed investor George Soros on CNBC this week.

(SOUNDBITE OF TV SHOW, "FIRST ON CNBC")

GEORGE SOROS: I think the biggest danger is that eventually, potentially, a currency war.

ZARROLI: And German Chancellor Angela Merkel went even further, saying she was concerned about the Japanese policies. Japan has been mired in an economic slump for two decades, and new Prime Minister Shinzo Abe has made clear he thinks the way to stimulate growth is by exporting more. Sung Won Sohn is an economist at California State University.

SUN WON SOHN: They feel that the only way they can grow their economy is by increasing exports, and one of the ways of increasing exports is by depreciating its own currency.

ZARROLI: In other words, Japan has decided that its currency, the yen, is too strong, and weakening it will make its exports cheaper and allow the country to sell more goods overseas. It's the kind of strategy that countries sometimes practice but rarely acknowledge publicly because it's so controversial. A country that weakens its currency may export more, but the move undercuts competing countries, whose goods become relatively more expensive. And Sohn says sooner or later, they tend to retaliate by weakening their own currency.

SOHN: If you can devalue your currency and not have other countries respond, then obviously you gain your market share. But historically, that's not what's going to happen. Other countries will respond.

ZARROLI: There are already signs the weakening yen is hurting exporters in South Korea, for instance, whose cars and electronic goods compete with Japan's. And Korean officials have warned they're considering how to respond. But Sara Johnson of IHS Global Insight says it's unlikely countries will wage a full-fledged currency war. For one thing, countries pay a price when their currencies falls. They may export more, but the things they import, like oil, also become more expensive.

SARA JOHNSON: I think the idea of competitive devaluation has been overhyped. Certainly, central banks do not want to generate inflation by making imports more expensive.

ZARROLI: Moreover, trying to lower the value of a country's currency can be more complicated than it sounds. The Fed has been flooding the U.S. economy with money for several years, but the U.S. dollar is still almost as strong as it was just two years ago. Jim Zarroli, NPR News.

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