Geithner Says Japan Isn't to Blame

Geithner Says Japan Isn't to Blame for Global Currency Tension

By Rebecca Christie -

Timothy Geithner, U.S. treasury secretary. Photographer: Andrew Harrer/Bloomberg

Play Video

Oct. 6 (Bloomberg) -- Daniel Katzive, a currency strategist at Credit Suisse Group AG, talks about the dollar, U.S. monetary policy and currency intervention in emerging markets. He speaks with Margaret Brennan on Bloomberg Television's "InBusiness." (Source: Bloomberg)

U.S. Treasury Secretary Timothy F. Geithner said Japan didn’t fuel international tensions when it intervened in the foreign-exchange market last month.

The Treasury chief said today there’s a “damaging dynamic” at work in currency markets as countries race to limit appreciation. When asked whether he thought Japan had “set the fire” for this dynamic, Geithner responded, “I don’t, no” in remarks at the Brookings Institution.

Instead, Geithner kept up his calls for China to let the yuan rise against the dollar. He said the “main problem” facing foreign-exchange markets is “a set of emerging-market economies that both remain undervalued and are leaning heavily against the pressures for appreciation.”

Geithner’s comments were his first on the yen since Japan announced on Sept. 15 that it had intervened to weaken its currency to boost exports and economic growth. He remained silent on the topic during about four hours of congressional testimony on currency markets and also multiple broadcast media appearances the same week.

By giving Japan a pass on its actions, the U.S. is sticking to its effort to seek a rise in the yuan and other Asian currencies against the dollar, said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York.

“I don’t think we should expect the U.S. to be singling out a single country for what many people perceive to be the sins of many,” Chandler said in a telephone interview.

15-Year High

Japan intervened in the currency market for the first time since 2004 after the yen rose to a 15-year high against the dollar. Japan sold 2.12 trillion yen ($25 billion) from Aug. 28 through Sept. 28, according to the Ministry of Finance.

The yen has risen 12 percent against the dollar this year, the best performance among 16 major counterparts, as concern the U.S. economic recovery will slow and Europe’s sovereign-debt crisis will worsen boosted demand for Japan’s currency as a refuge.

Geithner’s comments today come as he prepared for meetings with his European and Japanese counterparts at this week’s International Monetary Fund and Group of Seven finance ministers’ meetings. The G-7 meetings will discuss currencies when they gather in Washington, a Canadian finance department official told reporters on a conference call today, adding that Canada would like to see a more flexible Chinese currency.

China is less likely to allow the yuan to rise if it is “not confident other countries will move with it,” Geithner said. He said the issue “is not something we’re going to solve in the next three months.”

Chinese Premier Wen Jiabao said a rapid increase of the yuan would hobble China’s economy. Wen said in Brussels today that China will stick to its policy of gradually increasing the currency’s flexibility and faulted European leaders for teaming with the U.S. to pressure the Chinese government.

China’s central bank set its yuan reference rate at 6.6805, the strongest level against the dollar since the currency was first pegged in 1993.