US 'closely' watching Japan’s currency

The Obama administration is keeping a close eye on Japan to see if it manipulates its currency.

On Friday, the Treasury Department said that “we will closely monitor Japan's policies and the extent to which they support the growth of domestic demand,” according to its semi-annual currency report to Congress.

The report noted that the economy was a key factor in last year’s election, with incoming Japanese Prime Minister Shinzo Abe’s administration pledging a strong recovery.

“Early statements by Japanese officials suggested that policies would, in part, be directed towards ‘correcting’ yen strength, and there were proposals by some outside of government to ease monetary policy by purchasing foreign bonds. However, Japanese officials subsequently disavowed these statements,” according to the report.

In February, Japan did sign onto the G-7 statement, promising that their economic policies would not target their exchange rates. There have been concerns about the yen, as it has dropped in value since last year.

Treasury said officials would continue to steer Japan away from looking to undervalue its currency.

“We will continue to press Japan to adhere to the commitments agreed to in the G-7 and G-20, to remain oriented towards meeting respective domestic objectives using domestic instruments and to refrain from competitive devaluation and targeting its exchange rate for competitive purposes,” said the department in its report.

In the same report, China was not labeled a currency manipulator. Several lawmakers and some business groups have pressed for China to be tagged as a currency manipulator. They argue China undervalues its currency to gain an advantage in global trade.