Top Japanese and US officials are discussing bilateral trade just ahead of the broader negotiations aimed at striking a bilateral free-trade accord; Monday’s preliminary talks reportedly focused on the exchange of goods and touched upon exchange rates in both countries.
Kristian Rouz — Japanese Economy Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer have discussed bilateral trade, currency exchange, and investment during a three-hour meeting in Washington.
The talks were described as “frank and good” by the Japanese official, amid the Bank of Japan’s (BOJ) warning that the future trade framework with the US is a key factor in setting its monetary policies.
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According to reports, Motegi and Lighthizer centred their discussions primarily on the exchange of goods, while bilateral investment and currency regimes are expected to be subject to broader negotiations on a future free trade agreement.
The two officials sought ways to reduce the US trade deficit with Japan without hurting the island nation’s exports — and a possible way to go could be boosting US exports of pork and grain to Japan.
“The US probably doesn’t want to spend much time on trade talks with Japan and wants an early achievement,” Junichi Sugawara of the Mizuho Research Institute said. “The focus will be how Japan and the US will find a common ground as Japan doesn’t want to compromise on farm products and can’t accept auto export restrictions.”
Reports of these latest meetings come amid new remarks from BOJ Governor Haruhiko Kuroda, who said trade the rise of protectionism around the globe could pose a major challenge to Japan’s monetary policies.
Kuroda highlighted the International Monetary Fund’s (IMF) latest downgrade of its global economic outlook, saying the Fund still probably believes China and the US will reach a trade deal. If they don’t, Kuroda stressed, the world economy could find itself on the edge of a recession.
In this light, a free trade agreement between Japan and the US is deemed crucial to ensure uninterrupted and smooth bilateral economic ties — even in the event of the worst possible scenario for global growth.
“That is, I think, the most serious risk involved in the global economy,” Kuroda said.
He also vowed to ‘patiently continue’ the BOJ’s current path of monetary policy, using the unconventional combination of zero- and negative interest rates (ZIRP and NIRP, respectively) to support domestic lending, as well as business and consumer activity in the country.
For his part, Treasury Secretary Steven Mnuchin said he expects Japan to cooperate on the issue of currency exchange regimes. The Japanese yen is a global reserve currency, which is, however, exposed to rife fluctuations against its peers. In times of economic turmoil, international investors buy the yen, rendering it stronger, while brighter economic expectations or the BOJ’s stimulus measures out downward pressure on the Japanese currency.
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The US has long advocated more predictable FX rates among the currencies of its key trading partners; however, it’s unclear whether Japan would be able to deliver.
Motegi said currency issues would be discussed between the finance minister of Japan and his US counterpart at a later date — most likely, during the upcoming trade talks.
Motegi and Lighthizer also agreed to advance negotiations based on the respect for the economic interests of each other’s countries.
While both Motegi and Lighthizer refused to provide more details on their talks, they said more announcements would be made soon.
The two officials are expected to wrap up their discussions after the second day of talks Tuesday.