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back to index backAMERItalk April,  2007


Website of Lobby for Detroit Makers Alleges Yen Manipulation Subsidizes Japanese

The Automotive Trade Policy Council, Washington lobbying arm of the Detroit automakers, opened a new website last week aimed at promoting the notion that the Japanese government subsidizes auto exports to the U.S. by deliberately manipulating the yen.

The site, www.autoyensubsidy.org, includes a pastiche of quotes from Global Financial Warriors, a recent book by former Treasury undersecretary John B. Taylor, who says Japan intervened repeatedly and openly in 2002-04 to weaken the yen, and has turned to jawboning—making threats to do so to keep international currency traders off balance—since then.

Claims

It makes unsourced claims that the weak yen provides the average imported Japanese car a $4,000 windfall cost advantage over U.S. automakers, and presents charts, that show a range of subsidies” running from $3,000 on an economy car to $8,000-plus on a luxury, and that project figures twice that high if the dollar climbed to ¥135.

Support for Stabenow Bill

The site is apparently meant to drum up support for a new bill introduced in late March by Sen. Debbie Stabenow (D-Mich.) called the Japanese Currency Manipulation Act.

If passed, it would mandate the administration to do what it can to end alleged Japanese manipulation of the yen.

The Japanese, of course, contend that they haven’t intervened in the currency markets since three years ago. But Japan’s use of its foreign currency reserves to buy U.S. Treasury bonds is clearly one significant prop for the value of the dollar.

A second is the so-called yen carry trade, in which western lenders borrow in Japan to take advantage of rock bottom interest rates, convert the yen into dollars and lend the dollars in other markets where the returns are much higher.

The intermediaries are of course gambling that the yen’s value won’t suddenly appreciate—and as long as there is a signficant differential between Japanese and western interest rates, it’s likely to be a safe bet.

Unwinding

There was some unwinding of that business over the winter, based on expectations that Japanese interest rates would rise. The dollar fell from a high of about ¥122 in late January, to as low as ¥115 in early March—but it has since drifted back up to around ¥119.

To view a sample copy of the Japan Automotive Digest, click here.

Source: The Japan Automotive DigestGAI


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