Trump’s US$550 billion demand won’t weaken yen, Japan trade negotiator says
Akazawa’s comments give more insight into Japan’s understanding of how the investment vehicle will function
[TOKYO] The US$550 billion investment fund into the US that’s a pillar of the US-Japan trade deal won’t affect currency markets, according to Japan’s top trade negotiator Ryosei Akazawa.
Tokyo will fund the vehicle via methods including loans from the foreign exchange special account, generally using what Japan already holds in US dollar terms, Akazawa said on Wednesday (Oct 1) in Tokyo.
“We will operate with caution to make sure that the yen doesn’t weaken, causing a rise in import prices for Japan,” Akazawa said. “We’d calculated that US$550 billion is a scale where we can operate without impacting foreign exchange.”
Akazawa’s comments gave more insight into Japan’s understanding of how the investment vehicle will function, as questions remain over the implementation of the trade deal reached in late July. Given the sheer size of the fund, there has been speculation over how the investment flow may impact currency markets.
Akazawa also said that the US does not care about the breakdown of the US$550 billion vehicle, which will be a combination of investments, loans and loan guarantees. As long as the funds are available as needed, it will be up to Japan to decide on the breakdown, he said.
Akazawa has previously argued that only 1 to 2 per cent of the US$550 billion mechanism will be actual investment, with the rest being loans and loan guarantees.
He said on Wednesday that he based that assessment on past projects supported by the Japan Bank for International Cooperation and Nippon Export and Investment Insurance, the two organisations that will be involved in funding the US$550 billion vehicle.
The trade negotiator said he wants Japan’s next administration to carry out the investment fund, and that he’ll pass on knowledge to make sure that happens. Japan’s ruling Liberal Democratic Party is set to pick its new leader on Oct four to replace departing Prime Minister Shigeru Ishiba.
The trade deal between Tokyo and Washington cut US tariffs on Japanese cars to 15 per cent from 27.5 per cent and set levies on many other products at the same level. Japan also secured a safety clause in the deal so that it will not be treated worse than any other nation in terms of future sectoral tariffs on semiconductors and pharmaceuticals. BLOOMBERG
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