The Japan finance minister might be indicating intervention as US dollar falls against yen and makes Japan less competitive than US. Taro Aso makes a direct reference of intervening in forex when he was in Washington last month. The finance minister stated that the country would intervene if the foreign exchange market saw any further rise of the yen. The country would take a step that America discourages in most cases. This comment was made by Taro Aso at the parliament on Monday. He directly referred to an intervention in the forex market. He currently serves as finance minister in the office of Shinzo Abe, who is the current Prime Minister.
What the remark signifies?
The remarks made by the finance minister cannot be taken lightly. It is a sign of the tension that exists between Japan and US, especially with regard to exchange rates. Both countries are facing a gaining traction as the global growth rate slows down. As yen has been gaining it has dealt a blow to the exporters of Japan. They are becoming less competitive in the trade market as compared to US traders.
Tensions between both countries
The comments that the Japanese finance minister made helped to push up the rate of the dollar against yen. This occurred on the same day and reflected in trading in the New York stock market. There were certain facts different about the discussion that the Japanese finance minister had. He broke protocol when he was discussing forex markets. Usually the norm is that currency negotiations between different countries are done in a confidential manner. This is done in order to avoid speculations happening, which will have an impact on the market. The open comment of the finance minister was a threat to the US and a sign that the two countries are in conflict over this subject. It was evident from the comment that US Treasury department and the Ministry of Finance of Japan have not been seeing eye to eye when it comes to yen appreciation matters.
Mr. Aso pointed out to different instances to support his stance. He stated that the yen had strengthened by five yens against the dollar in a matter of two days at one time. This was definitely in excess. US Treasury officials have been on a different line of thought. They feel that the yen has not appreciated so high that one has to be concerned. This has become a point of argument between the two countries. Things To Keep In Mind When It Comes To Forex Trading, Go Here.
The semi annual currency report has been issued by the end of the month where US Treasury has placed Japan to be one of the trading partners whose policies in exchange rate need to be monitored. Japan meets two criteria out of the three specified by US department to showcase a fair and competitive trading environment. However, one of the criteria is not being met where it becomes an unfair advantage for Japan. Investors feel that US has made an indication that Japan is inching towards intervention which is not fair towards global competitive trading scenario.