Japan may have fired the first shot in a new round of global currency wars yesterday at a moment of heightened anxiety among policy makers, but outright hostilities are still some way off.

After bowing to political pressure, the Bank of Japan said it would buy potentially unlimited amounts of government bonds and widen the goalposts on inflation to allow prices to rise 2 per cent instead of 1 per cent. Although the yen strengthened on the day against the dollar and the euro – because markets had expected even firmer action – it was exactly the kind of move that could trigger competitive currency devaluations.

Just hours earlier, Jens Weidmann, the president of Germany’s Bundesbank, had warned that the erosion of central bank independence around the world threatened to unleash just such a race to the bottom, as politicians pushed central banks to replace inflation targets with measures that could serve to weaken currencies.