General Motors Chief Economist G. Mustafa Mohatarem told three Congressional committees at a unique tri-partite hearing today that the Government of Japan has deliberately weakened the yen to promote its exports at the expense of U.S. and other global manufacturers, providing billions of dollars in subsidies to Japanese automakers.
“Over the past several years, the Government of Japan has engaged in at least four strategies to keep the yen weak and thus to provide an enormous subsidy to Japan’s vehicle and auto parts exporters,” said Mohatarem.
“These approaches include maintaining huge exchange reserves and obtaining authority to purchase additional reserves as a signal to currency traders of its intent to keep the yen weak; intervening massively in currency markets, especially from 2002 to 2004; sending signals of possible interventions to the currency markets — so called ‘jawboning’; and purchases of dollar-denominated assets by quasi-public entities and private investors spurred on by the government’s commitment to a weak yen policy.”
The hearing on “Currency Manipulation And Its Effects On American Businesses And Workers” is conducted jointly by the House Committee on Ways and Means, Subcommittee on Trade; the House Committee on Financial Services, Subcommittee on Domestic and International Monetary Policy, Trade and Technology; and the House Committee on Energy and Commerce, Subcommittee on Commerce, Trade and Consumer Protection.
“Japan’s policies provided anywhere from a $2,000 to $14,000 cash windfall for each of the 2.2 million vehicles Japan’s automakers exported to the U.S. in 2006,” continued Mohatarem. “This amounts in total to a more than $13.5 billion annual subsidy on imported vehicles and parts used to assemble vehicles in the U.S.”
“This unearned windfall, which is documented in the profit reports of Japan’s auto companies, has been a major factor in the success of Japanese auto companies in the U.S. It has contributed significantly to the loss of hundreds of thousands of U.S. jobs in our auto and supplier industries; it is a major source of the nation’s nearly $90 billion U.S. trade deficit with Japan; and it has contributed to the severe economic decline in my home state of Michigan and in many other communities in America,” said Mohatarem.
A copy of Dr. Mohatarem’s testimony can be found at http://www.autoyensubsidy.org/.
“This unprecedented hearing by three major Congressional Committees is sending an important message to the U.S. Treasury, the Japanese government, and the global foreign exchange trading community, that this Congress believes that currency manipulation is real, it causes real damage to American workers and that this Congress will press for action to stop these practices,” said Stephen J. Collins, President of the Automotive Trade Policy Council. “It puts Japan and other countries on notice that future manipulation in foreign exchange markets will be dealt with quickly and harshly, and that Congress will take a much more direct and vigilant role in U.S. foreign exchange policy.”
“We would hope that by shining a bright light on the yen policy of the Government of Japan, a coordinated international effort would result in a yen that appreciates to its market-determined, ‘fair market’ level,” said Mohatarem. “Congress has the right to insist that the U.S. Treasury Department stop avoiding its responsibility to report when countries are manipulating their currencies to gain a trade advantage against U.S. producers and against U.S. workers. It has the right to insist that the U.S. join European finance ministers, who are deeply concerned about the yen’s misalignment, and to have this issue put on the table at the next G-7 meeting.”