Japan is pressing China to reform its yuan currency, but says flexible Asian exchange rates will not fix all the imbalances threatening the world economy, including massive U.S. deficits. The development came at the second day of the annual meeting of the Asian Development Bank in Istanbul.
Japan's Finance Minister, Sadakuzu Tanigaki, raised the issue during a news conference at the Asian Development Bank meeting. "So, accordingly, it would be natural that larger interest has been indicated on the currency of China, because China is a greatly influencing (correct) country in the world. So in that context I would say that it would be desirable to see a more flexible exchange rate regime," he said.
Mr. Tanigaki acknowledged that China faces challenges in reforming its fragile domestic financial system and addressing regional economic differences. The yuan has been trading around eight per dollar. The low yuan makes Chinese exports cheaper and U.S. manufacturers say this gives Chinese goods an unfair advantage.
The United States has also been pushing China to revalue the yuan and end its de facto peg to the dollar.
The topic of when China might move to revalue the yuan has been the focus of heavy attention at the three-day A.D.B. meeting. But China's Finance Minister, (Jin Renqing) on Wednesday said speculation is too intense for Beijing to take action now. At the same time, he said China is determined to reform its currency.
Meanwhile, Mr. Tanigaki said flexible exchange rates alone will not settle global-trade imbalances. He repeated a call by the Group of Seven leading industrial nations for the United States to deal with its massive budget and trade deficits, and for Europe to take steps as well. He is heard through an interpreter. "The U.S. needs to tackle their twin deficit issues and Europe needs to work further on their structural reform efforts, Japan also needs to proceed further with its structural reform," he said.
The non-profit Asian Development Bank, which is based in Manila, lends to dozens of countries, from the Fiji in the South Pacific to Sri Lanka in the Indian Ocean. Its 63 members also include such nations such as the United States, Germany, and Australia.