Japan Says U.S. Has Not Raised Forex Manipulation in Trade Talks

Finance Minister of Japan Taro Aso said on Tuesday that the U.S. government had not spoken to Tokyo about including provisions against currency manipulation in free trade talks.

Taro Aso’s comments come after U.S. Treasury Secretary Steven Mnuchin said on Saturday that Washington wants to include a provision to deter currency manipulation in future trade deals, including the one it is negotiating with Japan. The new provisions would be based on the currency chapter in its new deal to revamp NAFTA.

Steven Mnuchin’s remarks have raised concerns that the Japanese government’s efforts to keep currency policy separate from free trade talks are not working, and that it could be dragged into a dispute with Washington about the yen’s valuation.

“The U.S. side has not brought up the issue of currencies since we agreed in February last year that these matters would be discussed between Mnuchin and myself,” Taro Aso said.

“Our basic position is talks with the U.S. Trade Representative don’t include currencies.”

The United States government is pushing to re-write trade relationships to lower its trade deficit and change conditions it considers unfair to U.S. workers and companies.

The Trump administration has engaged in a tit-for-tat tariff war with China and wants to make currencies a central part of any solution to its trade dispute with China.

It recently renegotiated the NAFTA trade pact with Mexico and Canada.

Washington and Tokyo have also agreed to enter negotiations for a trade deal that could potentially limit Japanese auto exports to the U.S. market.

Chief Cabinet Secretary Yoshihide Suga, the Japanese government’s top spokesman, did not directly answer questions on Tuesday about currency provisions.

When asked if Japan would reject such provisions in trade talks with the United States, Suga said Tokyo’s position was the same as it always has been but did not elaborate.

Steven Mnuchin has expressed concern about avoiding competitive currency devaluation, whereby a country artificially weakens its currency to make its exports more competitive.

Group of 20 countries, including China and Japan, have in principle agreed that competitive currency devaluation should be avoided. However, there remains significant disagreement over what constitutes a currency decline designed to boost exports and one designed to stabilize markets.

Currency matters remain a sensitive topic for Japan because even moderate yen appreciation can have a major negative impact on export earnings and tends to hurt corporate sentiment.

Taro Aso, speaking to reporters, said Japan and the United States agreed in February last year that any issues related to currency policy would be discussed between Aso and Mnuchin, keeping them separate from talks on trade.