Japan added to U.S. monitoring list as currency practices raise concerns

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21st June 2024 – (Washington) The United States has added Japan to its “monitoring list” of significant trading partners whose currency practices warrant close attention, according to the Treasury Department’s semi-annual report. While reaffirming that no country has been labeled a currency manipulator, the report focuses on nations with large trade surpluses and active intervention in foreign exchange markets to gain trade advantages.

The Treasury Department’s report acknowledges that Japan has met two of the three criteria required for “enhanced analysis.” Specifically, Japan demonstrates a substantial current account surplus and a significant bilateral trade surplus with the United States. However, it falls short of meeting the third criterion, which involves engaging in persistent one-sided intervention in the foreign exchange market.

Japan now joins China, Taiwan, Malaysia, Singapore, Vietnam, and Germany on the monitoring list, as stated by the U.S. agency. None of these countries meet all three criteria for enhanced analysis.

The Treasury’s statement emphasises that no major U.S. trading partner manipulated the exchange rate between its currency and the US dollar to prevent balance of payments adjustments or gain unfair competitive advantages in international trade during the four quarters leading up to December 2023.

Japan’s inclusion in the monitoring list follows its recent intervention in the currency markets, initiated in April to support the weakening yen. The yen has significantly declined from approximately 115 per dollar before Russia’s invasion of Ukraine in February 2022 to nearly 160. The Bank of Japan’s decision to maintain ultra-low interest rates while other central banks have raised theirs has contributed to this trend.

To bolster the Japanese currency, authorities have reportedly spent around $62 billion, according to government data released last month. This intervention reflects ongoing efforts to stabilize the yen amidst economic challenges.