U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato reaffirmed in a joint statement their basic commitment to let markets determine currency exchange rates and not to target them for a competitive advantage.
¡°They reconfirmed their recognition of the G7 commitment that fiscal and monetary policies will remain oriented towards meeting respective domestic objectives using domestic instruments and will not target exchange rates for competitive purposes,¡± according to the statement detailing talks between the two finance chiefs.
The two chiefs still left scope for intervention in certain circumstances in line with previous statements, saying that it should be reserved for dealing with excess volatility or disorderly movements in the currency market. The release added that the two chiefs will continue to discuss macroeconomic and currency matters going forward.
The statement comes roughly a week after U.S. President Donald Trump signed an executive order putting into effect the two nations¡¯ recent trade deal. The statement indicates that the two countries intend to keep currency matters separate from Trump¡¯s potential push to reduce the U.S. trade deficit in the future.
The remarks also serve as a reminder that the Trump administration is keeping a close eye on Japanese policy and currency movements. Trump has repeatedly commented on the yen¡¯s weakness in the past, saying in March that Japan puts the U.S. at a disadvantage when its currency weakens.
The latest statement from the finance chiefs went into more detail than usual on what might be considered tools for manipulating the currency, but didn¡¯t state a need for any change in Japanese policy.
The yen edged a tad weaker against the dollar, following the release.
¡°I believe it was very meaningful that we were able to clearly confirm these points this time,¡± Kato told reporters Friday in Tokyo. ¡°In the joint statement, the U.S. and Japan reaffirmed the importance of a transparent foreign exchange policy, along with the shared understanding on FX policy up to now.¡±
The statement specified that macroprudential steps, measures on capital flows and government investment vehicles including pension funds should also not be used to target currency levels for competitive objectives, details that showed the close watch the U.S. is keeping on policy.
Japan remains on the currency policy monitoring list in the Treasury¡¯s most recent report issued in June. While Japan didn¡¯t cross the U.S. threshold for currency intervention in the latest report, the size of its current account surplus and its trade surplus with the U.S. did meet criteria for close monitoring.
Tokyo has spent close to $150 billion in the last three years trying to prop up the yen with the last move in July last year. Japan¡¯s interest rates, even...
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