(Bloomberg) — Japan’s Finance Minister Taro Aso pushed back against U.S. efforts to link the yen with bilateral talks aimed at striking a trade deal.
“We can’t agree to any talk of linking currency and trade policy,” Taro Aso told reporters Thursday in Washington D.C. after he met with U.S. Treasury Secretary Steven Mnuchin.
This was the first time Mnuchin directly spoke to Aso about currency in the context of trade, according to a Finance Ministry official who briefed reporters. The official said he believes that talks concerning currency will be secondary to the trade talks between Economy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer that kicked off last week.
Aso’s comments come ahead of a meeting between President Donald Trump and Japanese Prime Minister Shinzo Abe on Friday that is also expected to touch on trade and other bilateral issues.
Both Aso and Mnuchin clarified their stances on currency policy during Thursday’s discussions, but it’s unlikely that talks on the issue will move forward quickly alongside the Motegi-Lighthizer trade negotiations, the official said.
A U.S. Treasury Secretary spokesperson said in a statement that Mnuchin and Aso reaffirmed the importance of the U.S.-Japan economic relationship and discussed preparations for the Group of 20 finance minister’s meeting in June. They also discussed other issues including China, North Korea, and Iran sanctions, according to the statement.
“I think Japan — including the Ministry of Finance and the Bank of Japan — will fight to the end against a currency clause,” said Hiroshi Watanabe, president of the Institute for International Monetary Affairs in Tokyo and former currency chief at the ministry.
Japan kicked off its bilateral trade talks with the U.S. last week, after more than two years of foot dragging in the hopes that the U.S. would rejoin the successor deal to the Trans-Pacific Partnership agreement.
While Motegi has said the two sides are seeking to accelerate talks for a deal, he’s also repeatedly noted that any discussion on currency will be left to the Finance Minister and the Treasury Secretary, as per a joint agreement made in 2017. Motegi said Thursday that he and Lighthizer hadn’t discussed currencies this week or the week before.
Still, the U.S. Trade Representative has included a provision on currencies in its list of negotiating goals with Japan, and the U.S. has included references to currency in several recent trade deals. It’s also expected to be included in any eventual agreement with China.
The United States Mexico Canada Agreement — the revamped NAFTA pact — includes provisions forbidding member states from participating in currency manipulation, and says that each party should “refrain from competitive devaluation, including through intervention in the foreign exchange market.” Lighthizer has said that the agreement is a model for all future trade deals.
Watanabe said if a similar provision was included in the U.S. Japan agreement, it would give ground for the U.S. to criticize the BOJ’s ultra-loose monetary policy.
“If the currency reference in the USMCA enters the U.S. Japan agreement as it stands, that’s dangerous,” said Watanabe. “The fact that it’s vague isn’t good, you need to think it’s dangerous precisely because it’s vague.”