Background
Charges have
been made that Japan, and at times, Korea is manipulating
its currency to gain an unfair
competitive advantage in the United States, creating a subsidy for
their automobile companies. To date, the U.S. Treasury Department
has indicated that they have found absolutely no evidence of currency
manipulation.
“The Treasury and the Federal Reserve have expressed the view that exchange rates ought to be determined in free and open markets. As best as we can tell, the yen's value is being determined in a free, open, competitive market. There is no evidence of any intervention going on. The last time the Japanese purchased dollars was in March 2004. The behavior of the yen appears to be consistent with the monetary policies they're conducting, which in turn are closely related to the state of their domestic economy. So we don't see any manipulation or intervention in the value of the yen.” - Ben Bernanke, Chairman, Federal Reserve Board of Governors, Senate Banking, Housing, and Urban Affairs Committee Hearing on U.S. Monetary Policy, February 14, 2007
Position
The American
International Automobile Dealers Association supports
the findings of the United States
Treasury and the Federal Reserve.
There is no currency manipulation by the countries of Japan and
Korea.
Facts About the Issue
Sixty-three
percent of the vehicles sold by Japanese automakers
in the United States in 2006 were produced in North America where
the exchange rate has little or no effect. As the Congressional
Research Service (CRS) reported in March 2007, the increase in
Japanese auto imports was due to capacity constraints, not exchange
rates
Exchange rates are set
by currency traders and investors acting in the exchange
markets. These private foreign trade and investment flows have a far
greater impact on currency values than government intervention. The size
of the yen/dollar market is approximately $513 billion per day, or $134
trillion every year - too large for governments to manipulate. In 2004,
the Japanese government spent 14.8 trillion yen to purchase $137.2 billion
or 0.17 percent of all yen/dollar transactions during this period, contrary
to these efforts, the yen strengthened. Thus, there was no manipulation
and no subsidy.
Yen-dollar
exchange rates have not been ‘out of step’ with other major
currencies: Since 2001 the dollar has fallen against the yen and all major
currencies. In freely operating commodity markets (like the foreign exchange
markets), there can be no “misalignment.” The exchange markets
reflect the actions of the traders and, over the
long term, the comparative economics of the countries involved.
It is significant
that the only companies claiming that the Japanese
government is subsidizing its domestic producers
are the Detroit 3. Of all the U.S. companies competing
with Japanese industries only these three allege exchange rate manipulation
by the Japanese government.
