Exchange rates – and by extension trade competitiveness, restrictions, and tariffs – remain under close scrutiny.
President Joe Biden on Wednesday called for sharply higher U.S. tariffs on Chinese metal products, duties of up to 25% on certain steel and aluminum products, in a move that will risk angering Beijing.
Finance leaders from the United States, Japan and South Korea, meanwhile, agreed to “consult closely” on FX markets in their first trilateral meeting on Wednesday, nodding to concern by Tokyo and Seoul over their currencies’ recent sharp declines.
The agreement in their first trilateral meeting came as receding expectations of a near-term U.S. interest rate cut pushed the yen to 34-year lows, keeping markets on alert on the chance of yen-buying intervention by Japanese authorities.
“We will continue to cooperate to promote sustainable economic growth, financial stability, as well as orderly and well-functioning financial markets,” a joint statement read.
While Japan may not be actively trying to export its way to prosperity, and the yen’s weakness may be justified on relative economic and interest rate fundamentals, seismic terms of trade shifts like this in Asia tend not to go unmatched.
Could Asia be sliding towards a ‘beggar thy neighbor’ wave of competitive FX depreciation? The trilateral U.S.-Japanese-South Korean statement shows officials are acutely aware of the risks.
