Finance Minister Taro Aso said Friday the existing international pledge to refrain from targeting foreign exchange rates for competitive purposes should be kept, after contradictory remarks on the dollar by U.S. President Donald Trump and his treasury secretary shook currency markets.
“We have the agreements by the Group of Seven and Group of 20 countries that we should not target foreign exchange rates for competitive purposes, so it should be dealt with accordingly,” Aso told reporters after a Cabinet meeting.
Aso also said he would not comment on remarks made by foreign government officials, when asked about the views of Trump and Treasury Secretary Steven Mnuchin on currency policy.
Trump said Thursday in an interview with CNBC that he wants to see “a strong dollar.”
The president’s endorsement of the traditional U.S. policy in favor of a strong dollar contradicted earlier remarks by Mnuchin, who had said he favored a weaker dollar for U.S. trade — sending the currency lower.
The dollar fell to an over four-month low of ¥108.50 in New York before recovering to the upper ¥109 level following Trump’s strong dollar remark. The U.S. currency traded in a lower ¥109 zone Friday in Tokyo.
“It’s an international agreement, including by the G-7, that currency markets should reflect economic fundamentals and move in a stable manner,” Bank of Japan Gov. Haruhiko Kuroda told reporters in Davos, Switzerland, where a meeting of the World Economic Forum ended Friday.
His counterpart, European Central Bank President Mario Draghi, also recognized the importance of avoiding competitive devaluations.
Amid the euro’s recent strength, Draghi said at a press conference after a policy-setting meeting that increased volatility in currency markets was partly due to “the use of language” that did not reflect terms of reference agreed internationally.
Currency traders have been focused on future monetary tightening by central banks. The yen has been gathering strength this week, despite Kuroda saying Tuesday that it was “too early” to consider the timing of an exit from monetary stimulus as inflation was too weak.
Kuroda made the comments after a recent cut in the BOJ’s offers to buy Japanese government bonds sparked speculation about sooner-than-expected monetary tightening.
The yen’s appreciation often becomes a source of concern to Japanese companies with high exposure to overseas markets as it cuts into their profits made outside the country, though it also reduces import costs and could dampen inflation. The assumed change rate for the dollar-yen pair was put at ¥109.66 for the second half of the business year through March by companies surveyed in a BOJ survey.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.