WASHINGTON: The Obama administration yesterday put Japan on notice that it was watching its economic policies to ensure they were not aimed at devaluing the yen to gain a competitive advantage.
In a semi-annual report on currency practices of major trade partners, the US also said China’s currency remained “significantly undervalued,” but again stopped short of labelling the world’s second-biggest economy a currency manipulator.
It has been more than 18 years since the US Treasury has designated any country a manipulator. China was labeled a manipulator between 1992 and 1994.
The US Treasury said it would press Japan to adhere to the commitment it made in February as a member of the Group of Seven and Group of 20 nations to let the market determine exchange rates. The US move followed comments by Japanese officials that suggested they were targeting a weaker yen.
Treasury’s report highlighted statements made by Japanese officials last year who said they wanted to “correct the excessively strong yen,” and also some proposals to ease monetary policy by purchasing foreign bonds.
But since then, Japan has mostly avoided commenting on the yen and has not intervened in currency markets, according to the congressionally-mandated report.
“We will continue to press Japan to adhere to the commitments agreed to in the G7 and G20... and to refrain from competitive devaluation and targeting its exchange rate for competitive purposes,” the report said.
The Treasury also said it was closely monitoring policies in Japan meant to support the growth of domestic demand. The Bank of Japan launched a massive bond-buying program earlier this month to try to shock the economy out of two decades of stagnation. The policy has sharply undercut the value of the yen - ending the dollar to another four-year high against the Japanese currency on Thursday - and refuelled a debate about competitive devaluations.
Reuters
