Japan controversial economic policy sparks Davos fears of 'currency war

DAVOS (AFP) - Japan's controversial new economic policy emerged as one of the hot topics at this year's Davos forum, with talk of currency wars and strong rebuttals from Japanese officials.

The new government in Tokyo, led by Shinzo Abe, has pushed the Bank of Japan (BOJ) to step up efforts to battle nearly two decades of deflation and sluggish growth in the world's third-largest economy.

The BOJ on Tuesday unveiled a new inflation target of two percent and a massive programme of asset purchases to pump money into the economy, sparking accusations it had bowed to political pressure and compromised central bank independence.

The new government policy has also led to a steady decline in the value of the yen against other currencies - boosting exports - but other countries have expressed concern that Tokyo is pursuing a beggar-thy-neighbour approach.