The importance of the joint statement between the U.S. and Japan on currency manipulation

The U.S. Treasury Secretary and his Japanese counterpart have issued a joint statement reaffirming their commitment to refrain from “manipulating the exchange rate to gain a competitive advantage,” according to Michael Pfister, a currency analyst at Commerzbank.

The yen has hardly reacted to the morning news

This statement is relevant for two main reasons:

1. There is concern in the market that an appreciation of the yen could be used as a bargaining tool with the U.S., despite the fact that the trade agreement has already been concluded.

2. The Ministry of Finance of Japan occasionally intervenes in the foreign exchange market when officials are dissatisfied with the developments.

However, little is likely to change in practice. The Japanese finance minister has already emphasized that the statement would not deter Japan from intervening if necessary. In recent years, these interventions have been aimed at strengthening the yen, which is likely to be pleasing to the U.S.

However, it is unlikely that the ministry will intervene as long as the yen does not depreciate significantly again. Therefore, it is not surprising that the Japanese currency has barely reacted to this morning's news.

Implications for operators on CEX platforms:

• The stability of the yen could influence the trading pairs involving the Japanese currency.
• Traders should remain vigilant for potential future interventions if the yen depreciates significantly.
• The lack of immediate reaction from the market suggests that this type of statement has a limited impact in the short term.