U.S. Treasury Secretary Janet Yellen and her Japanese counterpart Shunichi Suzuki have affirmed the importance of stable foreign exchange rates amid the yen's recent rapid decline against the U.S. dollar, the Treasury Department said Friday.
The announcement was apparently meant to showcase that the United States and Japan are aligned on the issue, which has become a major concern for Tokyo on the back of the diverging monetary policies of the U.S. and Japanese central banks.
In their meeting a day earlier in Washington, Yellen and Suzuki "underscored the importance of maintaining previous G-7 and G-20 commitments on exchange rates," the department said in a press release, referring to the Group of Seven and the Group of 20 major economies.
The G-7 -- Britain, Canada, Germany, France, Italy, Japan and the United States, plus the European Union -- has taken a position that foreign exchange rates should be determined by the market, but that excessive volatility can have adverse impacts on the economy.
The G-20, which includes all of the G-7 members, has also recognized the negative implications of excess volatility and disorderly movements in exchange rates.
A weak yen has been seen as a boon to Japanese exporters as it boosts their overseas profits when the money is repatriated. When combined with soaring crude oil and other commodity prices, however, it becomes a headache for the resource-scarce country as it pushes up import costs and could dampen consumer spending.
In 1998, U.S. authorities joined Japan in efforts to stem the yen's depreciation at the time through a yen-buying, dollar-selling market intervention.
But experts are doubtful that the United States will support moves to weaken the dollar at present, when the country is struggling with inflation surging to a four-decade high on the back of coronavirus pandemic-linked supply chain issues and Russia's war in Ukraine.
U.S. backing would be essential even for a solo intervention by Japan, as dollar-selling could affect the U.S. economy, according to experts.
Asked whether he discussed the possibility of a market intervention with Yellen, Suzuki told reporters on Thursday that he will not comment on the issue.
The yen's decline is unlikely to change anytime soon, with the Bank of Japan maintaining its aggressive monetary easing and the U.S. Federal Reserve starting to tighten its monetary grip to tamp down inflation.
Suzuki visited the U.S. capital to attend a meeting of the G-20 finance chiefs on Wednesday, which took place on the sidelines of the spring meetings of the International Monetary Fund and the World Bank.
But the G-20 finance chiefs failed to issue a joint communique amid discord over the participation of officials from Russia, which faces criticism from many countries around the world over its military aggression against Ukraine.
During the bilateral meeting, Yellen and Suzuki also "reaffirmed their strong condemnation of Russia's unprovoked, unjustifiable, and illegal war in Ukraine, and agreed to strengthen cooperation on G-7 and G-20 issues, including global growth, global health, and vulnerable and low-income country debt," the Treasury Department said.
