[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 1021 Introduced in Senate (IS)]







110th CONGRESS
  1st Session
                                S. 1021

  To address the exchange-rate misalignment of the Japanese yen with 
      respect to the United States dollar, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 28, 2007

 Ms. Stabenow introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To address the exchange-rate misalignment of the Japanese yen with 
      respect to the United States dollar, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Japan Currency Manipulation Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The Japanese yen is, by any measure, in fundamental 
        misalignment with every major currency and, according to the 
        Bank of Japan, is now trading at the lowest trade-weighted 
        average in the last 20 years.
            (2) The Board of Governors of the Federal Reserve System 
        reported, in a January 2004 working paper, ``Since the early 
        1990s, the monetary authorities of the major industrialized 
        countries, with one notable exception, have greatly curtailed 
        their foreign exchange interventions. That exception has been 
        Japan, where the Ministry of Finance has continued to intervene 
        frequently--and at times massively--in foreign exchange 
        markets.''.
            (3) The fundamental cause of Japan's exchange-rate 
        misalignment is a set of deliberate policy decisions by the 
        Government of Japan designed to artificially suppress the world 
        market value of the yen in order to increase Japanese exports 
        substantially.
            (4) Japan's $875,000,000,000 in foreign currency reserve 
        holdings are the second largest in the world, far exceeding any 
        reasonable economic justification and extremely 
        disproportionate to the foreign currency reserves held by other 
        industrialized nations.
            (5) The United States trade deficit with Japan is the 
        second highest--$88,000,000,000 in 2006--and trade in 
        automobiles and automobile parts makes up two-thirds of the 
        trade deficit.
            (6) Japan has maintained a massive and consistently large 
        current account trade deficit with the United States for more 
        than 25 years, with the majority of that deficit attributable 
        to automobiles and automobile parts.
            (7) At the current average rate of exchange of 117 Japanese 
        yen to the United States dollar, Japan is providing a $3,600 
        subsidy for a typical family 4-door sedan made in Japan, a 
        $9,700 subsidy for upper-end and luxury vehicles made in Japan, 
        and thousands of dollars in cost advantages for Japanese 
        automobiles made in the United States with imported Japanese 
        automobile parts.
            (8) The exchange-rate misalignment of the Japanese yen with 
        respect to the United States dollar effectively provides a 
        subsidy to Japanese exporters and an unfair competitive 
        advantage for Japanese automobile manufacturers over United 
        States automobile manufacturers.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Currency intervention.--The term ``currency 
        intervention'' means--
                    (A) direct currency intervention, such as purchases 
                of United States dollars and sales of Japanese yen that 
                are greater than such purchases and sales for the 
                preceding 3-year period with a correlating effect of 
                countering the appreciation of the Japanese yen; and
                    (B) indirect currency intervention, such as 
                comments by officials of the Government of Japan on the 
                value of the Japanese yen that are accompanied by a 
                correlated change in the rate of exchange of the 
                Japanese yen with respect to the United States dollar 
                and other currencies.
            (2) Exchange-rate misalignment.--
                    (A) In general.--The term ``exchange-rate 
                misalignment'' means an undervaluation of the Japanese 
                yen as a result of protracted large-scale currency 
                intervention by or at the direction of the Government 
                of Japan in the exchange market. An undervaluation 
                exists if the observed exchange rate for the Japanese 
                yen is below the rate of exchange that could reasonably 
                be expected for the Japanese yen absent the 
                intervention.
                    (B) Factors.--In determining whether exchange-rate 
                misalignment is occurring and a benefit thereby is 
                conferred, the Secretary in each case--
                            (i) shall consider Japan's--
                                    (I) bilateral balance-of-trade 
                                surplus or deficit with the United 
                                States;
                                    (II) balance-of-trade surplus or 
                                deficit with its other trading partners 
                                individually and in the aggregate;
                                    (III) foreign direct investment in 
                                its territory;
                                    (IV) currency-specific and 
                                aggregate amounts of foreign currency 
                                reserve holdings; and
                                    (V) mechanisms employed to maintain 
                                the Japanese yen at an undervalued rate 
                                of exchange with respect to the United 
                                States dollar and other currencies and, 
                                particularly, the nature, duration, and 
                                monetary expenditures of those 
                                mechanisms;
                            (ii) may consider such other economic 
                        factors as are relevant; and
                            (iii) shall measure the trade surpluses or 
                        deficits described in subclauses (I) and (II) 
                        of clause (i) with reference to the trade data 
                        reported by the United States and the other 
                        trading partners of Japan, unless such trade 
                        data are not available or are demonstrably 
                        inaccurate, in which case Japan's trade data 
                        may be relied upon if shown to be sufficiently 
                        accurate and trustworthy.
                    (C) Computation.--In quantifying exchange-rate 
                misalignment, the Secretary shall develop and apply an 
                objective methodology that is consistent with widely 
                recognized macroeconomic theory and shall rely upon 
                governmentally published and other publicly available 
                and reliable data.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.

SEC. 4. REPORT ON CURRENCY INTERVENTION AND EXCHANGE-RATE MISALIGNMENT.

    (a) In General.--Not later than 180 days after the date of the 
enactment of this Act, and every 180 days thereafter, the Secretary 
shall submit to Congress a report on--
            (1) currency intervention by the Government of Japan with 
        respect to the rate of exchange of the Japanese yen and the 
        United States dollar and other currencies since 2000; and
            (2) any effort by the Government of Japan to create an 
        exchange-rate misalignment of the Japanese yen with respect to 
        the United States dollar and other currencies since March 2004.
    (b) Contents of Report.--
            (1) Currency intervention by the government of japan since 
        2000.--The report required by subsection (a) shall include--
                    (A) a description of all known and reported 
                incidents of direct or indirect currency intervention 
                by the Government of Japan undertaken to adjust the 
                rate of exchange between the Japanese yen and the 
                United States dollar and other currencies since 2000;
                    (B) a description of all other incidents of 
                currency intervention by the Government of Japan that 
                have not been reported but in which the Secretary knew 
                or suspected the Government of Japan had participated; 
                and
                    (C) for each incident of currency intervention 
                described in subparagraphs (A) and (B), a justification 
                for the reasons the United States did not consider the 
                incident of currency intervention, or report or act 
                upon the incident of currency intervention, under--
                            (i) the Exchange Rates and International 
                        Economic Policy Coordination Act of 1988 (22 
                        U.S.C. 5301 et seq.);
                            (ii) title III of the Trade Act of 1974 (19 
                        U.S.C. 2411 et seq.); or
                            (iii) section 2102(c)(12) of the Bipartisan 
                        Trade Promotion Authority Act of 2002 (19 
                        U.S.C. 3802(c)(12)).
            (2) Exchange-rate misalignment since march 2004.--The 
        report required by subsection (a) shall also include a 
        description of any efforts by the Government of Japan since 
        March 2004 to create or maintain the exchange-rate misalignment 
        of the Japanese yen with respect to the United States dollar 
        and other currencies, including through--
                    (A) statements made by officials of the Government 
                of Japan regarding the value or movement of the 
                Japanese yen that affect the rate of exchange of the 
                Japanese yen with respect to the United States dollar 
                and other currencies;
                    (B) covert exchange rate policies or attempts to 
                increase foreign currency reserve holdings or attain 
                material global current account surpluses;
                    (C) directives that alter investments of pensions 
                plans and insurance companies in order to gain an 
                unfair competitive advantage in international trade; 
                and
                    (D) any other effort to prevent effective balance 
                of payments adjustments or to gain an unfair 
                competitive advantage in international trade.

SEC. 5. PROPOSAL FOR JOINT UNITED STATES-EUROPEAN UNION PLAN TO ADDRESS 
              THE EXCHANGE-RATE MISALIGNMENT OF THE JAPANESE YEN.

    (a) In General.--Not later than 60 days after the date of the 
enactment of this Act, the Secretary shall submit to the Committee on 
Finance of the Senate and the Committee on Ways and Means of the House 
of Representatives a proposal for a comprehensive joint United States-
European Union plan to address the exchange-rate misalignment of the 
Japanese yen with respect to the United States dollar and other 
currencies.
    (b) Consultations.--The Secretary shall develop the proposal 
described in subsection (a) in consultation with--
            (1) the Board of Governors of the Federal Reserve System;
            (2) the Council of Economic Advisors;
            (3) the Secretary of Commerce; and
            (4) the Secretary of State.
    (c) Contents.--The proposal described in subsection (a) shall 
include a commitment to raise the issue of the exchange-rate 
misalignment of the Japanese yen with respect to the United States 
dollar and other currencies at each meeting of the G-7 Finance 
Ministers and each meeting of the G-7 Leaders until the Japanese yen is 
no longer in exchange-rate misalignment with respect to the United 
States dollar and other currencies.

SEC. 6. CONSULTATIONS WITH JAPAN.

    Not later than 30 days after the date of the enactment of this Act, 
the Secretary, in consultation with the Council of Economic Advisors, 
shall initiate consultations with the Government of Japan for the 
purpose of decreasing the foreign currency reserve holdings of the 
Government of Japan to permit effective balance of payments adjustments 
and to eliminate the unfair competitive advantage in international 
trade.

SEC. 7. RESPONSE TO FUTURE CURRENCY INTERVENTION.

    In the case of a direct or indirect act of currency intervention by 
the Government of Japan that has the effect of decreasing the rate of 
exchange of the Japanese yen with respect to the United States dollar 
to prevent effective balance of payments adjustments or to gain an 
unfair competitive advantage in international trade, the Secretary 
shall immediately take action unilaterally, bilaterally, or 
multilaterally, to dissuade, prevent, or object to such action.

SEC. 8. MEETING OF THE INTERNATIONAL MONETARY FUND.

    The United States shall call for the convening of a special meeting 
of the International Monetary Fund to reach a multilateral agreement 
addressing--
            (1) the exchange-rate misalignment of the Japanese yen with 
        respect to the United States dollar and other currencies;
            (2) the destabilizing effects of the exchange-rate 
        misalignment of the Japanese yen; and
            (3) the excessive foreign currency reserve holdings of the 
        Government of Japan.

SEC. 9. REPORT ON PROGRESS.

    Not later than 180 days after the date of the enactment of this 
Act, and every 180 days thereafter, the Secretary shall report to the 
Committee on Finance of the Senate and the Committee on Ways and Means 
of the House of Representatives on--
            (1) the progress made toward decreasing the foreign 
        currency reserve holdings of the Government of Japan;
            (2) actions taken at meetings of the G-7 Leaders, the G-7 
        Finance Ministers, and the International Monetary Fund 
        regarding the exchange-rate misalignment of the Japanese yen 
        with respect to the United States dollar and other currencies; 
        and
            (3) the progress toward eliminating the exchange-rate 
        misalignment of the Japanese yen with respect to the United 
        States dollar and other currencies.
                                 <all>