US adds Japan to currency 'monitoring list'; stops short of labelling it 'currency manipulator'
Bank of Japan
The United States Treasury Department on Thursday (June 20) added Japan to its "monitoring list" of major trading partners whose currency practices "merit close attention".
A semi-annual report, it evaluates countries with substantial trade surpluses that actively engage in foreign exchange markets to gain trade advantages.
The latest report, as per AFP, stops short of labelling any nation a "currency manipulator".
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What is a currency "monitoring list"?
The United States "monitoring list" report evaluates countries with substantial trade surpluses that actively engage in foreign exchange markets to gain trade advantages.
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According to the Treasury, Japan met two of the three criteria for "enhanced analysis." These included "having a material current account surplus and a significant bilateral trade surplus with the United States."
However, Japan did not meet the third criterion: being "engaged in persistent one-sided intervention in the foreign exchange market."
Alongside Japan, the monitoring list includes China, Taiwan, Malaysia, Singapore, Vietnam, and Germany. Previously, India was also a part of this list.
In a statement, the Treasury Department clarified that none of these countries met all three criteria necessary for enhanced analysis.
"No major US trading partner manipulated the rate of exchange between its currency and the US dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade during the four quarters through December 2023," the Treasury statement read.
Why was Japan added to the list?
Japan's recent inclusion in the list follows its intervention in the currency markets beginning in April. This intervention sought to support the yen, which had plummeted in value — from around 115 per dollar before Russia's invasion of Ukraine in February 2022 to nearly 160.
The sharp decline in the yen's value was in part attributed to the Central Bank of Japan's decision to maintain ultra-low interest rates even as central banks increased theirs.
Since initiating these measures, Japanese authorities have spent approximately $62 billion to bolster their currency, according to government data released late last month.
(With inputs from agencies)
