Japan's Finance Minister Taro Aso speaking earlier to reporters 1 May

  • Japan's actions in the currency markets will not be constrained by the US adding them to new monitoring list over FX policies
  • Japan will act as needed

Late on Friday the US Treasury expressed concerns over economic policies in China, Japan, South Korea, Taiwan and Germany, due mostly to their large bilateral trade surpluses and a material current account surplus. The countries have been put on a new monitoring list under provisions of the Trade Facilitation and Trade Enforcement Act of 2015, also known as the Customs Bill, passed by Congress earlier this year.

In its Semi-annual Report to Congress on International Economic and Exchange Rate Policies the US Treasury said:

  • current conditions in USDJPY market are "orderly"
  • reiterates the need for all countries to abide by G20 commitments

Said Aso:

"This is not something that will restrain our response on currencies. We are clearly seeing one-sided speculative moves and are extremely concerned. We will continue intently watching currency market trend so that speculative market movement does not persist, and will act as needed".

The US Treasury also had this to say:

  • urges China to provide more clarity over FX goals to help stabilize markets
  • urges Germany to use its large current account surplus to boost domestic demand
  • urges Taiwan and S Korea to limit fx interventions to exceptional circumstances
  • US Treasury will closely assess economic trends and Fx policies of economies on monitoring list

"The provisions of the Act provide the United States with valuable new reporting and monitoring tools, as well as new measures to address unfair currency practices. These new tools significantly enhance Treasury's ability to undertake a data-driven, objective analysis of a country's foreign exchange policies and their impact on bilateral trade with the United States and the broader multilateral trade position.

"The Report also describes the factors Treasury used to assess, under the Act, whether a country that is a major trading partner of the United States has: (1) a significant bilateral trade surplus with the United States, (2) a material current account surplus, and (3) engaged in persistent one-sided intervention in the foreign exchange market."

The report didn't seem to get a lot of news coverage but it's significant and we'll be getting more response and reverberations as the week goes on.

Full report here. Summary here.

Japan's Aso tells the US to back off