Japanese Prime Minister Shinzo Abe said yesterday he and US President Donald Trump agreed to allow their respective finance leaders to discuss currency issues, suggesting Trump may be willing to soften criticism that Japan was manipulating its currency to gain a trade advantage.
In a joint statement after a weekend summit in Washington, Abe and Trump said they reaffirmed their commitment to use fiscal, monetary and structural policies to strengthen domestic and global demand.
Abe said the statement underscored that the Trump administration recognised the effectiveness of ‘Abenomics’ three-arrow policies – a cocktail of monetary stimulus, fiscal expansion and structural reforms set in motion four years ago to revive the world’s third-largest economy.
“It shows the three arrows have gained understanding and of course, the BOJ’s monetary easing is part of this,” he said.
But some analysts were sceptical of Abe’s sanguine views, especially after Trump recently assailed both China and Japan as playing “the devaluation market”.
The Bank of Japan’s aggressive monetary easing and a subsequent weak yen have been among the few successes of “Abenomics”, providing a cushion for the export-reliant economy and giving the BOJ some hope of achieving a still-distant two per cent inflation target.
Any concessions won by Abe from Trump to refrain from making direct, market-moving comments that may trigger a yen spike and hurt Japan’s economy will be a relief to policymakers in Tokyo.
“When I was alone with the president at the White House, I told him that it would be inappropriate for us leaders to directly debate exchange-rate issues,” Abe told parliament.
“Currency issues are best dealt with by the finance minister and Treasury secretary of both countries,” Abe said, adding that Trump consented to the idea.
Key decisions on economic policy will likely be made at a bilateral economic dialogue, to be led by US vice president Mike Pence and Japanese Deputy Prime Minister Taro Aso.
Details on the dialogue remains sketchy but participants of the talks will be decided around April, when Japan is aiming to have Pence visit Tokyo, said a Japanese government official.
Japan hopes to use the dialogue to seek ways to avoid trade frictions and ensure Washington is engaged in the Asia-Pacific region, another government official said.
Japan should follow global rules if Tokyo starts bilateral trade talks with the US, but it’s unlikely that they would be acrimonious like the 1990s auto trade talks, a vice minister said yesterday.
Japanese policymakers were shocked by an accusation by Trump, made before the summit, that countries like China and Japan were manipulating their currencies to give their exports an unfair advantage.
However, Trump made no public criticism of Japan’s currency or monetary policies either during or after the weekend summit. A senior Japanese government spokesman said Abe and Trump did not discuss currency issues. Aso, who is also Finance Minister, said Japan proposed to Trump the idea of opening the economic dialogue.
“It may take some time but it’s important to come up with a good framework” for the economic dialogue, Aso told parliament.
Aso said discussions on currencies will be made directly with his new US counterpart Steven Mnuchin and will not be part of the economic dialogue.