Japan rebuffs US bid to get IMF to police currencies

TOKYO: Japan rebuffed a campaign by the US to introduce a foreign exchange surveillance role for the International Monetary Fund. “It’s not appropriate for the IMF to discuss levels of foreign exchange rates,” Japanese finance minister Koji Omi said at a press conference today in Melbourne, following a meeting of Group of 20 finance chiefs and central bankers. Foreign exchange rates “are currently being determined by market forces.”

The US is attempting to enlist the IMF to police foreign exchange rates and get Asian countries to loosen controls on currencies that US policy makers say fuel the record US trade deficit. Japan and China have opposed any efforts to give the IMF power to blame any particular nation or region for lopsided flows of trade and investment.

Robert Kimmitt, deputy secretary at the US Treasury, said November 17 in Melbourne that there “is now broad consensus the IMF needs to improve its surveillance, particularly over exchange rates. This means re-writing the IMF rules on exchange rate surveillance.”

G-20 finance ministers and central bankers discussed the IMF’s role in policing exchange rates “with the greatest caution,” German finance minister Peer Steinbrueck said. “Such a review, which should have as a goal that foreign exchange rates should be strongly market-driven, cannot be the subject of political speculation or action,” he said.

The heads of the three US automakers last week pressed President George W Bush to take action on the Japanese yen, saying the currency is artificially low and impeding their recovery.

Detroit’s automakers believe a “systemically undervalued” yen helps Japanese maintain a “significant” automotive trade-balance surplus, General Motors chief executive officer Rick Wagoner told reporters on November 14.

GM, Ford Motor and DaimlerChrysler’s Chrysler unit are all losing money this year as they continue to shed US market share to Japan’s automakers, mainly Toyota Motor and Honda Motor.

The yen is at its lowest against the currencies of the country’s biggest trading partners since 1985, according to a Bank of Japan index. The currency’s 5.2% decline against the dollar and a 5.5% drop verses euro the past six months have helped to propel the country’s longest postwar economic expansion.