[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.
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