Geithner Warns Japan, China on Currency

[Joanne98]

The Treasury Secretary-designate says the Obama Administration will oppose any moves to weaken the yen or the yuan
By Ian Rowley

It wasn't what leaders in Tokyo or Beijing wanted to hear, but Treasury Secretary-designate Timothy Geithner has wasted no time making it clear that the Obama Administration will oppose any moves by Japan or China to weaken their currencies. While Japanese exporters like Sony (SNE), Nissan (NSANY), and Toyota (TM) all expected to post operating losses as the yen soars to near-record highs against the dollar, Geithner told the Senate Finance Committee at his Jan. 21 confirmation hearing that the Obama Administration will frown on attempts by Japan to weaken its currency. "I believe that it's very important for the U.S. and for the global economy that our major trading partners operate with a flexible exchange rate system, in which market forces determine the value of exchange rates," he said after he was asked about the possibility that Japan may intervene to weaken the yen.

Geithner also issued a thinly veiled warning to the Chinese authorities about its currency. The yuan, unlike the yen, doesn't float freely and trades within a narrow band. Asked if China's "manipulation" of the yuan is a concern, Geithner said: "I do believe it is a significant issue." Those comments will also likely be unwelcome in China, which on Jan. 22 said gross domestic product growth in the three months through December slipped to 6.8%, down from 9% the previous quarter. That's well below the 8% level regarded by economists as necessary to generage enough jobs to accommodate new entrants into the labor force.

Tough on Japanese Exporters
In Japan, the timing of Geithner's comments could hardly be worse for Prime Minister Taro Aso's ailing government. During 2008 the buying power of the yen surged 19% against the dollar. Against the euro and the pound, the Japanese currency gained even more, rising 22% and 40%, respectively, making life tougher for Japanese exporters. Today, the yen is still hovering around 13-year highs against the dollar and record highs against the euro and pound. While the Ministry of Finance hasn't intervened directly in the currency markets since 2004, in recent weeks authorities have repeatedly hinted that, with the yen at historical highs and the economy mired in recession, a yen sell-off could be imminent.

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http://www.businessweek.com/globalbiz/content/jan2009/gb20090122_829664.htm

:wow:

[Skink]

1. Let him keep the back taxes.

[xchrom]

2. cool. very cool. nt

[Art_from_Ark]

3. With all due respect, Geithner is full of horse shit

at least when it comes to Japan. The value of the yen vis-a-vis the dollar today is more than 400% of what it was in 1971. In other words, the yen's value against the dollar has QUADRUPLED in less than 40 years, going from 360/dollar in 1971 to less than 90 per dollar today. No other major exporting country has had to cope with such a tremendous rise in the value of its currency. And this rise has not been monolithic, nor has it been all market-driven. In fact, in 1985, Ronald Reagan, unsatisfied that the currency market at that time was valuing the yen at around 260/dollar, forced through the Plaza Accord which essentially artificially increased the value of the yen to 160 per dollar, within a few months. How many export economies would have been able to cope with that?

So it's OK for the US to manipulate the yen for its own interests, but it's not OK for Japan to intervene in the yen market for its own interests?