Japan’s Finance Minister Taro Aso met Thursday with U.S. Treasury Secretary Steven Mnuchin amid lingering uncertainty about the new U.S. administration’s currency and economic policies.
Financial markets are closely watching potential exchanges on currencies following U.S. President Donald Trump’s warnings that the dollar was getting too strong. The talks were held on the sidelines of a Group of 20 finance chiefs gathering in Washington.
Trump has accused Japan of devaluing its currency to gain an advantage, but Tokyo dismisses the view, saying the Bank of Japan’s monetary easing was designed to achieve its 2 percent inflation target and not to devalue the yen.
Earlier in the month, the U.S. Treasury Department kept Japan, China and four other economies on its monitoring list for their currency practices.
When Aso and Mnuchin held talks in Germany’s Baden-Baden in March, they agreed to maintain existing international pledges on currencies, such as avoiding “competitive devaluations” and refraining from targeting foreign exchange rates for competitive purposes.
The dollar-yen pair has been capped in recent weeks by concern about rising geopolitical risks following the U.S. military attack on Syria and North Korea’s missile launches as the Japanese currency tends to find favor in times of market uncertainty.
If the world’s largest economy picks up growth momentum under Trump, who has promised to increase infrastructure spending, it will strengthen the case for the Federal Reserve to raise interest rates and lift the dollar against the yen, according to currency analysts.