THURSDAY, SEPTEMBER 16, 2010


KLMNO Japan intervenes toweaken yen Country buys dollars


to stop currency’s rise, lower export prices


BY CHICOHARLAN Japanintervened inthe foreign


currencymarket for the first time in six years onWednesday, buying dollars to try to weaken the yen and lower the price of Japanese exports overseas. The move came after weeks of


pressure from Japan’s business leaders,who hadwatched the yen rise roughly 10percentagainst the dollar this year, reaching a 15-year high. The intervention also marked the firstmajor decision— and the first major surprise — afterTuesday’s reelectionofPrime Minister Naoto Kan, who had in- dicated a reluctance to manipu- late themarket. After Kan defeat- ed challenger Ichiro Ozawa, the yen rose as high as 82.86 against thedollar,withcurrency investors assuming that intervention was unlikely. By buying dollars and selling


yenonWednesday,Japanesemon- etary authorities soonhad the yen


valued at 84.50 and falling. On Thursdaymorning, as stocks con- tinued to fluctuate in early trad- ing, officials said Japan may con- tinue selling yenifneeded. Because Japan did not coordi-


nate the move with other coun- tries,economistsviewedtheinter- ventionas a short-termfix. Japan’s action was quickly


looped into the broader trade de- bate. U.S. Rep. Sander Levin (D- Mich.) called the unilateral move “deeplydisturbing”asheopeneda congressional hearing on China’s currency practices. He said that having a second exporting nation intervene incurrencypolicywas a sign that the Obama administra- tion’sefforts topolicetheeconomy through multilateral agencies such as the International Mone- taryFundwerenotworking. “There does not appear to be


anything remotely approaching aninternationalagreement toend predatory exchange rate policy,” Levinsaid. China has long been accused of


keeping its currency undervalued —and its goods cheaper onworld markets — through sustained in- tervention in currencymarkets of the sort Japanundertook. For the United States, a weak-


ened yen — and a stronger dollar — could make U.S. exports more expensive abroad at a time when the administration is pushing to increase them. President Obama pledged earlier this year to double U.S. exports over the next five years. The intervention eases pain,


however, for iconic Japanese ex- porters such as Sony and Toyota, whose products becomemore ex- pensive for other nations’ con- sumerswhenthe yenstrengthens. Toyota says it loses 30 billion yen (about $350 million) for every one-yengainagainst thedollar. “I think both the government


andtheBankof Japanwereblush- ing with shame while watching the yen rise,” said Takashi Wa- tanabe,aprofessoratBunkyoUni- versityandaformerbanksupervi- sor for the Bank of Japan. “I think they just could not let that past themandplayedtheir card.” Thestockmarketsupportedthe


move,whichwasmade in tandem by Japan’s central bank and its financeministry.Followingthein- tervention, the Nikkei 225 stock average jumped 2.3 percent, clos- ing at 9516.56. “Our country’s economy is still in a very severe situation with


continued deflation,” Finance Minister Yoshihiko Noda said. Noda said Japan “cannot tolerate” theappreciatingyen.Heindicated that further intervention would be considered, ifnecessary. Japan did not reveal the extent


of its intervention, but the Dow Jones news service estimated that theMinistry of Finance had sold 1 trillion yen ($11.7 billion) to buy dollars. Bank of JapangovernorMasaa-


ki Shirakawa said in a statement that he “strongly expects that the action . . . will contribute to a sta- ble foreign exchange rate forma- tion.” Japanhadnot intervenedinthe


marketsinceMarch2004,partofa global trend toward a hands-off approach. But Japan is dealing with widespread woes, including growing concerns that its two-de- cade-old economic slumber will continue into a third. Japan’s economy was recently surpassed by China’s as the world’s second largest.


harlanc@washpost.com


Special correspondent Akiko Yamamoto in Tokyo and staffwriter Howard Schneider contributed to this report.


KIM KYUNG-HOON/REUTERS


An electronic board at a trading company in Tokyo shows the yen’s falling exchange rate against the dollar after the intervention.


Geithner sharpens his criticism of China’s economic policies


Treasury secretary says he’s examining ways


to bring about changes BY HOWARD SCHNEIDER


Treasury Secretary Timothy F.


Geithner onWednesday signaled a tougher line toward China’s economic policies, saying in pre- pared testimony that he is study- ing a “mix of tools” to persuade China to change how it manages its currency and to treat U.S. businesses more fairly. Using language more sharply


critical of China than has been the norm for the Obama adminis- tration, Geithner noted the “sub- stantial challenges” posed for the United States by an array of Chi-


nese policies, which he criticized as having a “negative impact . . . on our economic interests.” China “encourages outsourc-


ing of production and jobs from theUnited States. And it makes it more difficult for goods and ser- vices produced by American workers to compete with Chi- nese-made goods and services in China, the United States and third countries,” Geithner said. “We need a more balanced eco- nomicrelationship.This isimper- ative for us, but it is important to China as well.” His comments were prepared


for delivery at a hearing sched- uled for Thursday before the Sen- ate Banking Committee. The text was released in advance. Geithner’s remarks did not de- tail possible steps being consid-


ered. The United States would potentially have a variety of tools at hand, from complaints with the World Trade Organization to a more aggressive application of U.S. law or even the crafting of punitive legislation, a step fa- vored by some in Congress. But the change in tone is signif-


icant, highlighting frustration with the resurgence of China’s trade surplus with the United States, as well as the increasing sensitivity of economic issues be- fore the midterm elections. Trade between the two coun-


tries has become a pillar of the world economy, but the steady imbalance—theU.S. trade deficit withChina is about $200 billion a year — is considered a problem. China has been widely encour- aged to change its export-promo-


tion policies, just as the United States has been urged to trim its reliance on debt. Obama wants to promote U.S.


exports as a way to generate jobs and ease the trade imbalance, but many economists and analysts argue that the administration’s goals will be difficult to meet without better access to China’s large and rapidly growing econo- my. In particular, they cite China’s


management of its currency as a central problem that keeps Chi- nese goods cheap on world mar- kets, robsChinese consumersand companies of purchasing power they might use on imported goods, and helps feed its large trade surplus. Geithner has said that he agrees China’s currency, the ren-


minbi, is undervalued but that he prefers to deal with the matter through diplomatic channels, and he has specifically avoided mention of possible retaliation underU.S. orWTO laws. His latest statements are a


marked departure. In October, Geithner is due to issue Trea- sury’s biannual review of curren- cy manipulation around the world, and he said he would take particular stock of the renminbi’s lack of movement on world cur- rency markets. He deferred the last edition of


the report in deference to talks with the government in Beijing, and China subsequently prom- ised to allow the renminbi to float more freely. Since then,Geithner noted, the renminbi has hardly changed in


value and by some measures has gotten weaker—making Chinese exports cheaper still. “We are concerned, as are


many of China’s trading partners, that the pace of appreciation has been too slow and the extent of appreciation too limited,” Geith- ner said. “We will take China’s actions into account as we pre- pare the next Foreign Exchange Report, andweare examining the important question of what mix of tools, those available to the United States and multilateral approaches, might help encour- age the Chinese authorities to move more quickly.” schneiderh@washpost.com


EZ SU


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