CICC reported on May 20 that U.S. and Bank of Japan officials and Treasury Secretary will meet at the G7 summit held in the northeastern Tokyo city of Sendai . In view of the differences between the two countries on currency exchange rates, investors will closely monitor signs of tensions between Japan and the United States this week.
As the yen continues to appreciate against the US dollar, the two countries may have differences over the issue of the yen-dollar exchange rate. Since the beginning of this year, the yen has appreciated by nearly 9% against the US dollar.
Last week, Japanese Chancellor Aso Taro publicly stated that the Japanese government and the U.S. government still have differences on whether the appreciation of the yen has been so serious that it requires intervention measures on the exchange rate since the beginning of this year. Japan is more inclined to perform relatively weak yen because it will allow Japan's export sector to gain stronger competitiveness.
According to Wall Street Journal , Taro Aso also said: "We have been arguing on the phone."
He also said that if the yen continues to strengthen, the Japanese government will take intervention measures without hesitation. In addition, putting Japan on the "monitoring list for controlling exchange rates" does not restrict Japan's monetary policy.
This list was first announced this year, with China, Germany, Taiwan, South Korea and Japan all on this list.
The countries on this list must meet at least two conditions:
1. The balance of trade surplus with the United States is higher than US$20 billion.
2. The current account surplus accounts for more than 3% of GDP or in the money market, the country has carried out continuous unilateral intervention. The specific standard is that the foreign exchange scale of the country purchased within one year reaches more than 2% of GDP.
Japan may continue to advocate for their exchange rate intervention measures at the G7 summit.
The pressure on the Japanese economy will be alleviated as the Federal Reserve hints that interest rates may be raised in June.
In addition, Japan's first quarter economic data released earlier this week showed that Japan's first quarter economic growth was better than outside expectations. This brought a glimmer of hope to the Japanese economy, which had been stagnant for nearly two decades.
The US dollar has appreciated 3.2% against the yen since this month. Most economists believe Japan is unlikely to intervene at current exchange rate levels. A team of currency strategists at Deutsche Bank also said earlier this month that Japan will not intervene unless the dollar reaches 100 against the yen.
Economists warn that the continued appreciation of the US dollar against the yen will have an impact on global markets. The recent weak performance of the dollar has helped recovery in emerging economies that have suffered hard-hit.
At the same time, the strengthening yen also reduced China's official willingness to guide the depreciation of the RMB. Market volatility at the beginning of this year, and similar situations last summer, stemmed from market concerns about the impact of the continued weak yen on global economic growth.
The market is widely expected to continue to raise interest rates at some point this year, which is likely to trigger a new round of strengthening in the US dollar. This will also make the Fed more cautious about the rate hike resolution.
Although the United States prefers a strong dollar and Japan prefers a weak yen, the global market prefers to see a weak dollar and a strong yen.
This also means that the United States and Japan may have to maintain the current situation temporarily.
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