• Mar 17, 2010



We can't even pretend to know the first thing about currency manipulation, so we won't bother trying to explain how artificially depreciated currency can help imports into the U.S. market. But American manufacturing groups have long accused the governments of China, Japan and South Korea of manipulating their currency to gain an bigger foothold in the U.S. market, and domestic automakers say Japan and South Korea in particular have been artificially depreciating their currency for years. Earlier this month, The American Automotive Policy Council, which represents General Motors, Ford and Chrysler, met with Obama Administration auto task force head Ron Bloom about the manipulation of the Japanese yen and Korean won, and now the AAPC is talking with members of Congress.

A report from The Detroit News shows that Japan added $56 billion to a "currency interventions fund" last week – a fund that apparently has a substantial cash reserve. Further, Japanese Finance Minister Naoto Kan told the Japanese Diet that his government is ready to manipulate currency by depreciating the yen. The AAPC claims that the actions of the Japanese and Korean governments put American manufacturing jobs at risk, adding:

"American auto companies will consider intervention in foreign exchange rate markets by the Japanese government that weakens the yen as unfair competition directed at the American automotive market and American workers as the industry begins to recover from the economic recession."

The DetNews claims representatives from the Japanese government were not available to comment on the group's claims. For its part, AAPC says that the goal of meeting with Congress is action:

"we urge you to make clear to the governments of Japan and Korea that the U.S. Congress considers such interventions unacceptable and that any decision to proceed with or continue such interventionist policies will be strongly and directly challenged by the United States in defense of fairness and American jobs."

Another area of concern for the AAPC is what they allege is the inherently closed nature of Asian auto markets. The Organization for Economic Co-Operation and Development claims that the two countries are currently the most closed out of the 30 markets with auto industries. The ECOD also notes that domestic automakers in those countries account for 95.5 percent of all auto sales.

[Source: The Detroit News]



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  • 62 Comments
      • 4 Years Ago
      first of all:

      not all nations/unions manipulate their currency in a way that serves their companys or national interests.

      The central bank of the european union (as requested by the germans) is nearly 100% independent. Meaning that the only goal they have is to protect the euro and keep inflations as low as possible.

      also:

      it's quite funny that the US (creating a global economic meltdown by manipulating balance-sheets/currency/credit-ratings and intentionally ignoring signs of warning) blame other countries which still have to suffer because of the american way of "living on credit".

      clean up your own backyard before yelling at others
      • 4 Years Ago
      I'm not sure what they expect Congress to do... it seems like this is more of a WTO thing, anyway.
        • 4 Years Ago
        They've gone to the WTO several times I think. Nothing ever becomes of it, or the WTO deems that nothing shady is going on. My guess is they can be bought just like just about any other agency.
        • 4 Years Ago
        Yeah, well, who files complaints with the WTO? Not being sure, my guess would be the government, not private actors.
      • 4 Years Ago
      Currency manipulation by those three countries is a fact and no American administration will do anything about it. These countries are export oriented, and they do that by selling their currencies and buying American debt which funds the wars in Iraq and Afghanistan and the recent bailouts and stimulus packages. If China allowed its currency to appreciate against the dollar I think they would have reached parity by now ( like the Canadian dollar did today).
        • 4 Years Ago
        Because our own administrations and congresses are too busy playing shinanigans with our currency. How much do we owe China now?
        • 4 Years Ago
        @ebleyes: so, how is Fox news this morning?
      • 4 Years Ago
      The WTO is a forum for discussing trade in goods and services, and resolving disputes about barriers to trade. It has nothing to do with currency or fiscal policies, and for good reason---imagine if a country's central bank had to answer to a panel of law professors in Switzerland Not to say someone won't try a "non violation nullificaton" case there, but don't bet on it succeeding.

      Further, all countries "manipulate" their currency, and influence it to where they think is the right balance of promoting exports and inviting investment. It's called monetary policy and the operation of the central bank. They also manipulate it with public spending to some degree, to control the effects of inflation on currency.

      Regarding China, the country is not keeping its currency cheap out of spite for U.S. companies. Rather, it needs to maintain 10 percent annual growth to sop up the tens of millions of uneducated, low-skilled peasants flooding their cities now who will either work or riot. They can only do that by keeping exporting factories going full bore. It's not a free ride for them either. First, it weakens their consumer spending power. Second it creates a heap of dollars that have to be spent on U.S. assets or otherwise isolated from their economy.
      • 4 Years Ago
      Another nail in the coffin for the foreign automakers to chew on. This time the Feds are going to pressure the Japanese yen and Korean won into submission.

      Look for trade barriers to be set up here in America as well. The one I like best is a law that says, "Only products manufactured in the U.S. may be sold in the U.S." Some provision will be made for certain unavailable commodities though. That would create millions of jobs right here overnight. Don't say it ain't gonna happen. IT WILL!

      • 4 Years Ago
      Currency manipulation is a serious thing. If they weren't allowed to get away with it, the Chinese, Japanese, and Koreans would have serious trouble remaining competitive, and not just in the auto industry.
        • 4 Years Ago
        And China just called out the USA for doing its own currency manipulation, and its being reported as such in their media. I recall reading an article about how Canada was trying to adjust its currency as well because of the declining USD. I'm pretty sure many countries engage in this practise, so I'm not sure why only Japan, China and Korea are being blamed here.

        You've got to wonder what the truth is, and why doesn't the US just go to the WTO to complain about the practise? Isn't that the whole point of the organization?
        • 4 Years Ago
        All countries do currency manipulation. It's part of the money market. But it's not as simple as Japan arbitrarily deciding "hmmm I think 100 yen should equal a dollar." It's driven by demand for the currency, investment in the currency, etc.

        Those that think Japan is evil for manipulating currency have no clue how the currency market works. The US tried to change the value of its currency against the Japanese yen in 1971, called the Smithsonian Agreement. There was also the Plaza Accord in the 80s. What the Japanese govt does is it buys US currency, and gives very little interest in its currency to discourage foreign investment. Conversely, the US wants other countries to investment in US currency, hence why Japan and China are so heavily vested.

        The Japanese yen has deflated in recent years to be much closer to its "real" value, hence why Japanese exports have been hurting. US automakers are still crying because they want to leverage whatever advantage they can get. It's not as though the US govt. doesn't invest in currency, or that the US govt. just lets the US currency go whereever it wants to. People need to get a clue.
      • 4 Years Ago
      PROTECTIONISM, HERE WE COME!!!!!!

      now that Pandora's economic box is open for Government and business to collude together, this is all going to such a wonderful destination.

      This, and passing laws without passing laws... like they are talking about on capital hill now...

      This country is the United States of America in name only, until the government is forced back into the limits of their Constitutional constrictions, and returns to the accountable republic with free markets that this country was founded to be.

      The Constitution is the law of the land. The government is operating outside of it's bounds set out by the constitution.
        • 4 Years Ago
        There will be another vote, which is why they are keeping tracks of who supports it and who doesn't. This procedure was used nearly 100 times by Speaker Gingrich and over 100 times by Speaker Hastert. The Congress establishes it's rules for proceeding at the beginning of each Congress and the last several have adopted the previous Congress's rules for procedure without any changes.
        • 4 Years Ago
        Mark my words here. I am a conservative. I believe in federalist limited government under the real text of the US Constitution and the Declaration of Independence, and I am saying this unequivocally, about both Republicans, and Democrats.

        THEY WERE WRONG!

        It doesn't matter that the Rs used it for minor amendments and omnibus items, not full comprehensive legislative bills.

        It doesn't matter that precedence for wrong doesn't excuse another wrong, and that pointing across the aisle and saying "they did it before..." is bullcrap game-playing. No different than the D's talking about an up-or-down vote now, when they denied it to federal judicial nominees a few short years ago when the Rs asked for it... Remember McCain's "Gang of 14"? Bullcrap game-playing while our country is being destroyed, and our Constitution shredded.

        It DOES matter that this will take over 1/6th of the economy, and change the inherent relationship between citizens and their government, without proper procedure, because they can't PASS THIS CRAP with proper procedure.

        IT DOES MATTER that this will shred the US constitution, both in process, and in effect.

        IT DOES MATTER that what the government is trying to do will cost TRILLIONS OF DOLLARS, NONE OF WHICH WE EVEN HAVE.

        This cannot be allowed, not these back-door procedures, nor the assumption of health care money, and college tuition money by the US Government.

        WE THE PEOPLE DOES NOT MEAN "THEY THE GOVERNMENT."

        And if they get the notion that they need to combat currency manipulation, they need to look in the mirror.

        What they are doing is destroying the US Dollar, and the economic future of this country. If they try to pass a tariff, or any other "protection" from other countries... it will accelarate the economic demise.

        WAKE UP AND SEE THAT OUR COUNTRY IS BURNING!!!!!
        • 4 Years Ago
        Boxer,

        I wish you and all the other "free market" morons out there would wake up and realize that there is no such thing.

        Not when our govenment allows other countries to participate on one end and not the other.

        Yes, we all know full well that you are against giving government any control and you are sitting there in your basement with a tin hat on because you're afraid big brother's out to get you (let me clue you in, big brother, nor anyone else for that matter cares about what you're doing), but we do need govenment to protect our economy from foreign raiders who have had free access without reciprocation for decades. Our country is burning, it has been burning for a long time, but using similar trade practices as the other ecomomic elite is the only way to protect ourselves from economic takeover, if our government won't do it and our people are too blind to bother with it, when will we lose our way of life? Do I think this health care bill is a bunch of BS? Yes. Do I think we need to worry about finding ways for our citizens to work so we don't have to provide them free health care? Hell yes. That won't happen with American money continually floating over to Asia.
      • 4 Years Ago
      I don't buy this argument, and here's why.

      Over the past 10 years, Euro has appreciated against Dollar from 1 Euro = ($0.85 = $1.38). That's over 50 percent increase. Yet, Germans still make money on cars they sell, that are largely made in Germany.

      Most Japanese and Korean cars sold in the U.S are built here in the U.S, so they're largely cushioned from the dollar fluctuation.

      Do you really think they need to manipulate their currencies to gain competitive edge?
        • 4 Years Ago
        Guys.

        These are 3 charts. Won, Yen, and Yuan against USD.

        Yen
        http://finance.yahoo.com/q/bc?s=JPYUSD=X&t=5y&l=on&z=m&q=l&c=

        Won
        http://finance.yahoo.com/q/bc?s=KRWUSD=X&t=5y&l=on&z=m&q=l&c=

        Yuan
        http://finance.yahoo.com/q/bc?s=CNYUSD=X&t=5y&l=on&z=m&q=l&c=

        Notice how Won and Yen fluctuate quite a bit against USD over the past 5 years. In past year, those two strengthened 20-30% against USD.

        Now look at Chinese Yuan, and see how there graph is completely flat with zero fluctuation in the past 2 years. That's currency manipulation.

        I'm not arguing that weak Yen and Won don't benefit Japanese and Korean. It does. But their currencies have been strong against dollar before for many years, and they still managed to gain grounds on domestic car companies. Like Eric said, products and services play much bigger role.

        With domestic car makers, first it was the UAW. Now it's the currency? Give me a break. It's really making them look pathetic.
        • 4 Years Ago
        A desire for currency manipulation has been strong enough for the CEO of Honda to threaten to move the company out of Japan if the government doesn't do it, and you'd have us believe it's a non-issue.

        http://www.leftlanenews.com/ceo-strong-yen-weak-sales-could-force-honda-to-leave-japan.html

        "Under the pressure of a rising yen, Honda’s Chief Executive Takeo Fukui is calling on the Japanese government to act swiftly in order to stabilize the country’s currency...“If the government is saying, ‘We don’t care about the export industry’, then that’s fine — we’ll act accordingly,” Fukui told Japanese reporters on Friday. "We could switch to importing more cars into Japan, bring research and development facilities overseas, and in an extreme scenario move our headquarters offshore."
        • 4 Years Ago
        It's on the profit side where the manipulation pays off. Let's say currently the dollar = 500yen. So for every dollar of profit in the US it translates to 500yen. Now the Japanese government devalues the yen to 1000yen = dollar. They have just doubled the profits of all their goods.

        Remember, Toyota/Honda are Japanese companies and that's where the money goes. They report their financials in Yen, not dollars.
        • 4 Years Ago
        @mentallyretired

        That article is dated 12/23/2008.

        Dollar was 90 yen back then.

        You know what it's at right now?

        90 yen. And 90 yen is not far from historic strong against dollar, so I'm sure they would love to have weaker yen. But that's not happening.

        And Honda hasn't pulled out of Japan. They never will. It was a stupid bluff by the ignorant CEO who's been running Honda to the ground with one bad decision after another, as we the Autoblog.com readers all know.

        And don't blame Japan. It's the U.S. that's trying hard to devalue its currency by massive deficit and Bernanke helicopter money.
        • 4 Years Ago
        Do you think Asian brands would have ever gotten any market share if they hadn't? Or as quickly? And please, compare the MSRP of a 10 year old BMW and the comparable 2010 model. The strong euro is a big part of why we don't get the VW Scirocco, B-Class Mercedes, Audi A5 sportback, any mainstream Italian or French cars, nor any of the other cool stuff from the other side of the world. It hasn't hurt some as bad, but it wasn't that long ago that Volkswagen would preface statements with "If we stay in the American market...."
        • 4 Years Ago
        Per BusinessWeek: "a one-yen weakening of the currency's value against the dollar adds about $400 million to Toyota's bottom line"


        http://www.businessweek.com/globalbiz/content/aug2009/gb2009084_070741.htm
      • 4 Years Ago
      The practice is sometimes referred to as "dollar mercantilism." A good book about the practice and what to do about it is called "Trading Away our Future" by Howard Richman.

      Foreign countries buy dollars to keep the value of the dollar artificially high relative to their own currency.

      Mercantilism is a very old practice used to take markets and industries.
      • 4 Years Ago
      Living in Tokyo, I find this story remarkable. Due to the recession the Japanese yen has rarely been stronger against the US dollar, pound and euro. Exporting companies here are hurting badly with 25% increase in value over the last two year, while we are all ordering cheap western good through Amazon.
      I'll not surprised the Japanese government is trying to bring its value down a bit to make a more even playing field, any sensible government would.
      • 4 Years Ago
      Fact: Without foreign consumer goods our economy would collapse overnight.

      Fact: US publicly traded retailers, i.e. Walmart, have put US manufacturing out of business because they require profit margins so high that it is impossible for US based corporations to produce a product and make profit. Try to make a profit when the retailer requires 70% margin with a 6% invoice chargeback, 20% new store invoice discount, and 5% advertising allowance, and meet a retail price point of $14.99.

      That means you are only going to get paid $2.85 for your $15 msrp product. That $2.85 per product needs to cover manufacturing, payroll, warehousing, insurance, and every other business expense. After all of that you still have to make some profit or it isn't even worth producing in the first place. Guess what, it is impossible. Therefore you have to figure out where you can manufacture a product to sell for $2.85 and generate a profit. That is how we wind up with products manufactured for $.75 in China selling for $14.99. People wonder why they are painted with toxic paint.

      In terms of currency it gets even worse. The Japanese economy compared to the US in relative debt is far worse off, yet the Yen has appreciated by nearly 30% to the dollar over the past two years. In fact the dollar is near historic lows vs the Yen. Very bad news for Japanese corporations reliant on US consumers for solvency. Even more worse off for American divisions of foreign corporations that must purchase goods manufactured overseas with dollars. During a down economy an American division of a Japanese company has lost nearly 30% margin just in currency exchange alone.

      Let me put it this way. Lets say you get paid in Dollars but have to buy a Big Mac meal with McD coins. Last month you got 5 McD coins for every dollar and a Big Mac meal is 10 McDs. That meal cost you $2. But this month you only get 2 McD coins per dollar. The meal now costs $5. The increase in value of McD coins just cost you a lot of money.

      That is also why the inflation numbers the government uses and the inflation reports that send the stock market into a rally are complete BS. If inflation averaged 6.5% through all of last year, went up 1.4% in January, and then went down .02% in February how can the government claim that there was no inflation or economists exclaim that deflation is around the corner? 6.5%+1.4%-.02%=7.7% which is an increase, which is the definition of inflation, which means you are paying more for everything.

      A devaluation of the Yen to 100 Yen per dollar will do wonders for the US economy. Perhaps even stopping the overall inflation rate from hitting 1970s levels, which we are already starting to see.
      • 4 Years Ago
      Wait what??? Unfortunately, the Japanese yen has not been depreciated for at least 2-3 years now. Right now, $1 is the equivalent of 90 yen and it has been like this for at least the past year and before that it was only about 100 yen for about 2 years and a lil higher at 110 yen for about 2-3 years. I dont see how that is depreciating because ideally it should be about $1 to 110 yen. Just to give you an idea of buying power, your typical 12 once can of coke is roughly 75 cents if you buy from a vending machine here in the US but in Japan they have a smaller can and it is about 110 yen from a vending machine. So at the current exchange rate, a dollar wont even buy you a can of coke in Japan.
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