USD/JPY: Approaching recovery to the 160-yen range
2024-06-25
■ The US Treasury Department has identified Japan as the "target country" for exchange rate policy, citing the US trade surplus and current account surplus.
■ If the appreciation rate of the USD/JPY pair were to accelerate, it could lead to heightened vigilance against foreign exchange intervention. However, despite this, the pair is still expected to demonstrate a trend of high consolidation.
The US Treasury Department's report, released on the 20th, provides a comprehensive analysis of the exchange rate policies of major trading partner countries and regions, covering the period until December 2023. The report identifies countries that meet the three criteria of the 2015 Trade Facilitation Act and the Trade Enforcement Act as 'target countries for surveillance '. Importantly, no country has been identified as a 'currency manipulator' in this report. The United States, however, will continue to monitor any signs of currency manipulation, including in countries such as China, Vietnam, Taiwan, Malaysia, Singapore, and Japan, which was re-identified after its lifting in June 2013.
The US Treasury Department explained that the reason for re-identifying Japan as a "surveillance target country" is that its trade surplus with the United States ($62 billion) and current account surplus (3.6% of GDP) exceeded the standards set by the US Treasury Department (annual trade surplus of goods and services exceeded $15 billion, and current account surplus exceeded 3% of GDP). Regarding the intervention by the Japanese Ministry of Finance and the Bank of Japan in buying Japanese yen and selling US dollars in April and May, the United States believes that this is not a "non-competitive behavior" aimed at promoting a depreciation of the domestic currency that is conducive to exports from the country or causing concerns for the United States. The Japanese Ministry of Finance releases intervention data monthly, stating that it is highly transparent and has not sparked controversy, but stating that "exchange rate intervention should only be carried out in extremely exceptional circumstances based on appropriate negotiations.".
In addition, the US Treasury Department uses "more than eight months of sustained and unilateral exchange rate intervention in the past 12 months (total intervention accounting for over 2% of GDP)" as the criterion for judging a "currency manipulator." Therefore, this exchange rate report is expected not to limit Japan's intervention in buying the yen. Considering the possibility of interest rate cuts starting after September and the upcoming French presidential elections on June 30th and July 7th, concerns about the depreciation of the US dollar and the appreciation of the Japanese yen still exist. However, the US dollar/yen broke through the 158-yen mark on the 20th, showing an upward trend. The financial officer of Kanda stated that "if there is excessive volatility, the policy response will not change." It is expected that the US dollar/yen will remain relatively high in instability.
■ If the appreciation rate of the USD/JPY pair were to accelerate, it could lead to heightened vigilance against foreign exchange intervention. However, despite this, the pair is still expected to demonstrate a trend of high consolidation.
The US Treasury Department's report, released on the 20th, provides a comprehensive analysis of the exchange rate policies of major trading partner countries and regions, covering the period until December 2023. The report identifies countries that meet the three criteria of the 2015 Trade Facilitation Act and the Trade Enforcement Act as 'target countries for surveillance '. Importantly, no country has been identified as a 'currency manipulator' in this report. The United States, however, will continue to monitor any signs of currency manipulation, including in countries such as China, Vietnam, Taiwan, Malaysia, Singapore, and Japan, which was re-identified after its lifting in June 2013.
The US Treasury Department explained that the reason for re-identifying Japan as a "surveillance target country" is that its trade surplus with the United States ($62 billion) and current account surplus (3.6% of GDP) exceeded the standards set by the US Treasury Department (annual trade surplus of goods and services exceeded $15 billion, and current account surplus exceeded 3% of GDP). Regarding the intervention by the Japanese Ministry of Finance and the Bank of Japan in buying Japanese yen and selling US dollars in April and May, the United States believes that this is not a "non-competitive behavior" aimed at promoting a depreciation of the domestic currency that is conducive to exports from the country or causing concerns for the United States. The Japanese Ministry of Finance releases intervention data monthly, stating that it is highly transparent and has not sparked controversy, but stating that "exchange rate intervention should only be carried out in extremely exceptional circumstances based on appropriate negotiations.".
In addition, the US Treasury Department uses "more than eight months of sustained and unilateral exchange rate intervention in the past 12 months (total intervention accounting for over 2% of GDP)" as the criterion for judging a "currency manipulator." Therefore, this exchange rate report is expected not to limit Japan's intervention in buying the yen. Considering the possibility of interest rate cuts starting after September and the upcoming French presidential elections on June 30th and July 7th, concerns about the depreciation of the US dollar and the appreciation of the Japanese yen still exist. However, the US dollar/yen broke through the 158-yen mark on the 20th, showing an upward trend. The financial officer of Kanda stated that "if there is excessive volatility, the policy response will not change." It is expected that the US dollar/yen will remain relatively high in instability.