On Tuesday, Japanese Finance Minister Shunichi Suzuki and U.S. Treasury Secretary Janet Yellen decided to collaborate to address rising food and energy costs as well as currency market volatility, which has been made worse by Russia’s war in Ukraine.
They said that the war had increased exchange rate volatility, which might have detrimental effects on economic and financial stability.
They also made a commitment to work together “when appropriate” on currency-related matters.
In a joint statement following the meeting, the two parties, referring to the Group of Seven and Group of 20 economies, said that they will “continue to discuss closely on exchange markets and collaborate as necessary on currency matters, in keeping with our G7 and G20 commitments.”
Later on Tuesday, Yellen acknowledged the significant weakening of the yen in recent weeks, but she maintained that the United States believed that currency intervention was only justified in “rare and exceptional circumstances.”
The value of the Japanese yen has declined this year against the US dollar by approximately 16%, reaching a new 24-year low on Monday above 137 yen to the dollar.
The two presidents said that they were united in their “strong condemnation of Russia’s unjustified, illegal, and unprovoked assault against Ukraine” and that they will keep raising the price of Russia’s war by enforcing economic and financial sanctions.
As “a unique military operation,” Russia has called the invasion of Ukraine.
The Ukraine crisis has increased the likelihood of a worldwide recession by fueling an increase in cost pressures and escalating supply chain problems as a result of a blow to demand.
In addition, Yellen and Suzuki addressed problems including climate change and global tax reforms while urging China and other non-Paris Club creditors to work “constructively” with low-income nations experiencing debt hardship.
After the meeting, Yellen told reporters that Washington and Beijing have repeatedly highlighted China’s lack of cooperation on debt restructuring for low-income countries.
The joint statement made mentioned a price ceiling on Russian oil that the United States had proposed to prevent Moscow from exploiting rising oil prices to finance its conflict in Ukraine, but it stopped short of outlining any consensus on a plan.
During the New Year’s event heralding the start of trading in 2022 in the U.S., Japan’s Finance Minister Shunichi Suzuki gets ready to ring a bell.
On Capitol Hill in Washington, D.C., U.S. Treasury Secretary Janet Yellen gives testimony at a hearing on President Biden’s proposed 2023 federal budget by the House Ways and Means Committee.
Yellen told reporters that although the United States had not specified a specific price cap figure, Russian budgets had in the past taken a $40 per barrel assumption into account and their marginal cost was “well below that.”
I’m not saying $40 is the right amount, she clarified. “We’re not sure what the ideal number is,”
If a proposed price cap on Russian oil and sanction exemptions that would permit shipments below that price is not adopted, the price of oil could increase globally by 40% to about $140 per barrel, a senior U.S. Treasury official earlier warned.
The U.S. official stated that the objective was to set the price at a level that covered Russia’s marginal cost of production so that Moscow would be encouraged to continue exporting oil but not high enough to allow it to finance its war against Ukraine.
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The Japanese finance minister, who had earlier on Tuesday issued a fresh warning against the resurgent yen weakness, claimed he had conveyed to Yellen his government’s concern regarding the currency’s recent swift depreciation.
We are closely monitoring the market with a high sense of urgency because, as the G7 agrees, excessive volatility and disorderly movements can harm economic and financial stability, Suzuki told reporters after the meeting.
The two officials, according to Yellen, did not discuss intervention or related policy.
The United States, she continued, thought that nations like its own, Japan, and other G7 members should have market-determined exchange rates and that intervention should only be used “in rare and exceptional circumstances.”
