Aid confab for Kosovo may deal with forex, Summers says

Japan Policy & Politics, July 19, 1999

WASHINGTON, July 12 Kyodo An international meeting Tuesday in Brussels over the reconstruction of Kosovo may take up the world exchange rate situation, U.S. Treasury Secretary Lawrence Summers said Monday.

The focus of attention will be ways to alleviate the plight of the war-torn Kosovo and economic development in Southeastern Europe, but "the exchange-rate situation may come up," Summers said in a briefing to reporters on the budget and tax policy of the United States.

Summers' comments on currency intervention last week illustrated significant gaps between Washington and Tokyo over exchange policy.

In a U.S. television interview, the treasury secretary urged Japan to focus on stimulating domestic demand as a means to ensure its economic recovery, rather than boosting exports through currency manipulation.

"The focus in Japan has to be on strengthening the fundamentals, which goes back to domestic demand-led growth, which goes back to allowing market forces to operate, and that has to be the right focus," Summers said.

He said, "Manipulating currencies is not the approach that produces long-run prosperity." The remarks were taken as an explicit criticism of the Bank of Japan's recent yen-selling market intervention aimed at boosting Japanese exports.

The BOJ recently stepped into currency markets to prevent the yen's appreciation against the dollar following a better-than-expected jump in the nation's gross domestic product (GDP) data for the January-March quarter and an improvement in the key BOJ business sentiment index.