BUENOS AIRES (Reuters) – Japan should cautiously deal with the recent comments by US President Donald Trump on currencies and convince Washington that its monetary easing should not weaken the yen but outstrip deflation.
FILE PHOTO: Japanese yen and dollar bills are featured in this photo from June 22, 201
The US dollar fell the most against a basket of six major currencies in three weeks on Friday after Trump again complained about the strength of the greenback and Federal Reserve hikes.
The US President also deplored the strength of the dollar and accused the European Union and China of manipulating their currencies.
Trump is not trying to influence the currency markets, Finance Minister Steven Mnuchin said, reiterating that a strong US dollar reflects a strong US economy and is in the long-term interest of the United States.
"This time around, the targets are China and the European Central Bank, but the content of the criticism is the same, so we have to be careful," the Japanese official told reporters on the sidelines of a G20 meeting in the Argentine capital.
"If necessary, we may need to remind the United States of our previous monetary policy discussions," which are based not on currencies but on domestic goals, he added.
The Bank of Japan has taken an aggressive monetary stimulus to reach its hard-to-reach inflation target of 2 percent. Despite five years of massive money printing, inflation has struggled, but the yen has weakened steadily.
This could make Japan susceptible to criticism of being a currency manipulator as it remains on the watch list of the US Treasury.
China is the main target, with Beijing the "biggest part of the US trade deficit," Japanese Finance Minister Taro Aso told reporters on the sidelines of the G20 meeting of finance ministers and central bank governors.
Rising trade tensions have fueled Japan's concerns about currency volatility, which could lead to an appreciation of the safe haven yen and jeopardize its export-dependent economy.
Aso underlined the need to boost global growth through free and fair trade, saying that no country would benefit from an inward-looking policy through protectionist measures.
"Excessive current account imbalances should be resolved through multilateral, non-bilateral framework conditions," added Mr Aso.
"The issue should be addressed through macroeconomic policies and structural reform by reorienting savings and investment, rather than introducing tariffs."
Aso expressed concerns of the G20 that accelerating the normalization of monetary policy in advanced economies could weaken emerging markets currencies and cause capital outflows from countries such as China.
At the meeting, Japan asked China to clarify its yuan monetary policy and looked for factors for its devaluation.
coverage by Scott Squires in Buenos Aires; Writing by Tetsushi Kajimoto in Tokyo; Editing by Clarence Fernandez