Japan Back on Currency Monitoring List

The Treasury Department reported yesterday that no countries currently meet the definition of currency manipulation, but Japan has been returned to the list of countries to watch.

In its semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, Treasury concluded that 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.

Seven economies are on Treasury’s “Monitoring List” of major trading partners that merit close attention to their currency practices and macroeconomic policies: China, Japan, Malaysia, Singapore, Taiwan, Vietnam and Germany.

Japanese Intervention

Japan returns to the list after previously having been removed from the monitoring list. Over April and May 2024, Japanese authorities intervened for the first time since October 2022, purchasing yen and selling dollars, which strengthened the value of the yen, according to the report. “Treasury’s expectation is that in large, freely traded exchange markets, intervention should be reserved only for very exceptional circumstances with appropriate prior consultations,” Treasury said. “Japan is transparent with respect to foreign exchange operations, regularly publishing its foreign exchange interventions each month.

Meanwhile, Treasury once again criticized China for its lack of transparency. China’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate policy make China an outlier among major economies and warrant Treasury’s close monitoring, according to Treasury.

“Treasury continues to promote policies that support stronger and more balanced global growth that benefits American workers, including through close engagement with major trading partners on currency-related issues,” Treasury Secretary Janet Yellen said.

Find the full report here.