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Congress Cool to Tokyo Forex Move

Thursday, September 16, 2010

Sander Levin

Tokyo -- While the opinions of economists appear to be widely split on the advisability of Japan's bold move to intervene in the currency markets yesterday, leaders of the US Congress are clearly annoyed.

Chairman of the House Ways and Means Committee Sander Levin (D-Michigan) called the intervention "a deeply disturbing development" and suggested that it represented "a predatory exchange rate policy."

Levin's strong comments would seem to be attributable to the fact that he is a key Congressional leader attempt to pressure Beijing to raise the value of the yuan, and Tokyo's move "sets a bad example" in that context.

Levin and many others in Washington have been arguing with increasing passion that China "manipulates" the market to keep the value of the yuan low, which thus gives Chinese exports a pricing edge in the world market. This is what Levin calls a "predatory" forex policy.

"The status quo with currency imbalances is unacceptable and unsustainable," Levin declared yesterday.

The fire-breathing out of Congress should probably be seen against the background of the looming Congressional elections in November as well as the stagnating US economy and it's nearly 10% official unemployment rate.

Though unpopular in Washington, the Kan administration's move is - at least temporarily - popular in Tokyo. The surprise intervention has so far succeeded in lowering the value of the yen by about 3% to above the 85 mark.

Prime Minister Naoto Kan and other Japanese officials have signaled that they are ready to intervene repeatedly if they feel it needs to be done.

This intervention is highly popular with DPJ backbenchers, and similar moves have also been loudly advocated in the past by Yoshimi Watanabe's Your Party and some factions of the LDP.

PanOrient News