Letter to President George W. Bush

Letter

Dear Mr. President,

I am writing to urge you to address the Japanese policy of keeping the yen artificially low when you meet with Japanese Prime Minister Shinzo Abe. The Japanese government holds nearly $900 billion in foreign reserves, which it built up by intervening in currency markets since 2000. Other countries, notably European members of the G7, have expressed concerns about the destabilizing and distorting effects of the low yen on the global economy. The United States should be doing the same.

Although the Japanese government says it is not directly intervening, the fact that it has not sold these reserves leaves the yen "undervalued by between 25-30%" according to a report last month by the Peterson Institute for International Economics. I hope that you will raise this issue and urge the Prime Minister Abe to address these foreign-exchange reserves that accumulated through currency-market interventions. This action would bring the yen more in line with market fundamentals.

The low value of the yen has substantial negative effects on American manufacturers. Japan's policy of subsidizing exports, particularly its 2.4 million auto exports to the U.S., offers an unfair competitive advantage. For example, at the current level of 119 yen to the dollar, the yen's subsidy creates a $4,000 cost advantage for a typical four-door sedan, up to a $12,000 cost advantage for luxury vehicles, and thousands of dollars for Japanese vehicles made in the United States with imported parts. In 2006, the automotive trade made up two-thirds of the United States' $88 billion trade deficit with Japan.

I believe American companies can compete with anyone in the world. However, they cannot compete effectively when their competitors are supported by other governments' deliberate policies that create a cost advantage of 25-30% for their producers. This is about taking a stand for American businesses, American workers and American jobs. Mr. President, we can compete with anyone in the world when everyone plays by the same rules, and our manufacturers cannot afford for this to be another missed opportunity for you to help level the playing field on trade. I urge you to change course to address the artificially-low yen.

Sincerely,
U.S. Senator Debbie Stabenow (D-MI)

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