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US Congress to take action against China and Japan
WASHINGTON - The same day that Toyota Motor Co. reported record profits boosted by $2.4 billion from a weak Japanese yen, three U.S. House committees held an unusual joint hearing on how Congress should deal with currency manipulation by Japan and China.

Spearheaded by Rep. Sander Levin, D-Royal Oak, the hearings come as Michigan lawmakers and Detroit automakers see an opening to press their case that Japan’s weak yen hurts the U.S. auto industry, and a growing swath of manufacturers say China has stolen business by capping the value of its yuan.

“The issue on the table today is not whether the United States needs to take action to respond to the interventionist policies of China and Japan in this key area, but what form that action should take,” Levin said.

But several experts testified that Congress could do more harm to the U.S. economy than good if it struck out at China, and that Japan’s government had not interfered with the value of the yen in three years. Stephen Roach, chief global economist for Morgan Stanley, said sanctions by Congress against China could lead to higher inflation and interest rates in the United States.

“I sincerely worry you and the Congress are moving into very dangerous territory,” Roach told Levin. “Sanctions on China could tip an already weakened U.S. economy into recession.”

By weakening the value of a currency relative to the U.S. dollar, countries can make their exports cheaper to U.S. customers. Many lawmakers have been far more concerned with China, which keeps the value of its yuan closely tied to other currencies, than with Japan, which hasn’t directly moved in currency markets since 2004.

Detroit’s automakers have been agitating for action against Japan for years, and independent experts do say the yen is now undervalued, by as much as 20%. General Motors Corp. chief economist Mustafa Mohatarem said his estimates put the benefit of a weak yen to Japanese automakers in the United States at $13.5 billion a year.

“The government of Japan has created a one-way market for the yen,” he said. “It can only go down, not up.”  More at Detroit Free Press

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