BALI, INDONESIA - U.S. Treasury Secretary Steven Mnuchin has given his strongest signal to date that he wants to see provisions in future trade agreements that prevent currency manipulation.
Whilst most currencies freely float, some are fixed, and others are 'managed.'
Mnuchin wants to ensure 'management' doesn't equate to 'manipulation.'
Japan expressed concern when Mnuchin raised the issue at the International Monetary Fund and World Bank annual meetings in Bali on Saturday.
Japan occasionally intervenes in foreign exchange markets to support or to smooth out volatility in the yen.
The Japanese currency in recent years has become a safe haven unit, similar to the U.S. dollar. When uncertainty strikes, traders buy the yen and the dollar.
Any provision in trade agreements that would restrict any form of currency management would leave Japan in a position, it says, that would make it vulnerable.
Mnuchin said Japan would be caught up in that, saying 'everybody,' would be.
Japanese media on Sunday expressed concern that the United States would be able to label Japan as a currency manipulator if such provisions were included in trade agreements, and Japan continued to intervene to stem sharp moves in its currency.
Mnuchin however said such provisions had been adopted in the new U.S.-Mexico-Canada Agreement (USMCA) and he sees that agreement a model for future trade deals.
“Our objective would be that the currency issues. We’d like to include (them) in future trade agreements. With everybody. I’m not singling out Japan on that,” he said.
“We haven’t had specific conversations on that. We obviously continually have conversations with my counterparts about currency. But that is the model we’d like to incorporate going forward."
Asked to respond to Mnuchin's idea, Japan’s Economy Minister Toshimitsu Motegi on Sunday said in a television interview: “If discussions on this subject become necessary, they will be made by the finance ministers of both countries.”