Japan hits back at charge that it is devaluing the yen
By MAIKO TAKAHASHI AND CONNOR CISLO | Bloomberg | Published: February 1, 2017
Prime Minister Shinzo Abe, his main lieutenant in the Cabinet and Japan's top foreign exchange official on Wednesday all pushed back against President Donald Trump's assertion that Japan is keeping its currency devalued.
"Japan's monetary policy is for the domestic purpose of beating deflation, and isn't done with FX in mind, so I think that those remarks are a little bit wide of the mark," said Masatsugu Asakawa, the Finance Ministry's foreign exchange policy chief.
Speaking in parliament, Abe said that it is not accurate to say that Japan is devaluing the yen, and that he would explain Japan's monetary policy to Trump if necessary. He said that it's important to exchange views, including thoughts on foreign exchange. Chief Cabinet Secretary Yoshihide Suga earlier called Trump's comments "totally inaccurate."
Trump on Tuesday said: "You look at what China's doing, you look at what Japan has done over the years. They — they play the money market, they play the devaluation market and we sit there like a bunch of dummies," according to a transcript in Congressional Quarterly.
Earlier on Tuesday, the Trump administration took aim at Germany, saying it was gaming foreign-exchange markets. Chancellor Angela Merkel rejected the accusation. Donald Tusk, the EU's president, placed the U.S. alongside Russia, China and terrorism as a source of instability.
"The change in Washington puts the European Union in a difficult situation, with the new administration seeming to put into question the last 70 years of American foreign policy," Tusk said in a letter to European leaders on Tuesday ahead of an EU summit on Feb. 3.
The barbs with Japan indicate likely friction points when Trump and Abe meet next week in the U.S. This isn't the first time that Trump has raised the issue of Japan's currency and relations with the U.S. On the campaign trail in 2015, he accused Japan of currency manipulation. At a press conference on Jan. 11 this year, he said the U.S. has a "trade imbalance" with Japan.
Asakawa added that Japan hasn't recently intervened in the currency market, "so without more explanation, I am not sure what is being referred to." The last time Japan intervened was in 2011, when the yen hit a postwar high in the aftermath of the Fukushima earthquake and nuclear meltdown.
Japan's Finance Minister Taro Aso said in parliament on Tuesday that Trump had introduced "a new factor of uncertainty," which could contribute to a weak yen and strong dollar for "some time." Aso will accompany Abe and explain Japan's foreign exchange and monetary policies to Trump in the U.S. next week, according to a Reuters report, citing a government source.
Japan's government watches the currency markets with a sense of vigilance and acts with purpose when necessary, Suga told reporters in Tokyo at the afternoon press briefing. "It will be very important for Japan and the U.S. to reach mutual understanding on the economy and trade, including the currency problems."