II 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Japan Currency Ma5 nipulation Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds the following: 

8 (1) The Japanese yen is, by any measure, in 

9 fundamental misalignment with every major cur10 rency and, according to the Bank of Japan, is now 


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1 trading at the lowest trade-weighted average in the 

2 last 20 years. 

3 (2) The Board of Governors of the Federal Re4 serve System reported, in a January 2004 working 

5 paper, ‘‘Since the early 1990s, the monetary au6 thorities of the major industrialized countries, with 

7 one notable exception, have greatly curtailed their 

8 foreign exchange interventions. That exception has 

9 been Japan, where the Ministry of Finance has con10 tinued to intervene frequently—and at times mas11 sively—in foreign exchange markets.’’. 

12 (3) The fundamental cause of Japan’s ex13 change-rate misalignment is a set of deliberate pol14 icy decisions by the Government of Japan designed 

15 to artificially suppress the world market value of the 

16 yen in order to increase Japanese exports substan17 tially. 

18 (4) Japan’s $875,000,000,000 in foreign cur19 rency reserve holdings are the second largest in the 

20 world, far exceeding any reasonable economic jus21 tification and extremely disproportionate to the for22 eign currency reserves held by other industrialized 

23 nations. 

24 (5) The United States trade deficit with Japan 

25 is the second highest—$88,000,000,000 in 2006— 


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1 and trade in automobiles and automobile parts 

2 makes up two-thirds of the trade deficit. 

3 (6) Japan has maintained a massive and con4 sistently large current account trade deficit with the 

5 United States for more than 25 years, with the ma6 jority of that deficit attributable to automobiles and 

7 automobile parts. 

8 (7) At the current average rate of exchange of 

9 117 Japanese yen to the United States dollar, Japan 

10 is providing a $3,600 subsidy for a typical family 4- 

11 door sedan made in Japan, a $9,700 subsidy for 

12 upper-end and luxury vehicles made in Japan, and 

13 thousands of dollars in cost advantages for Japanese 

14 automobiles made in the United States with im15 ported Japanese automobile parts. 

16 (8) The exchange-rate misalignment of the Jap17 anese yen with respect to the United States dollar 

18 effectively provides a subsidy to Japanese exporters 

19 and an unfair competitive advantage for Japanese 

20 automobile manufacturers over United States auto21 mobile manufacturers. 

22 SEC. 3. DEFINITIONS. 

23 In this Act: 

24 (1) CURRENCY INTERVENTION.—The term 

25 ‘‘currency intervention’’ means— 


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1 (A) direct currency intervention, such as 

2 purchases of United States dollars and sales of 

3 Japanese yen that are greater than such pur4 chases and sales for the preceding 3-year period 

5 with a correlating effect of countering the ap6 preciation of the Japanese yen; and 

7 (B) indirect currency intervention, such as 

8 comments by officials of the Government of 

9 Japan on the value of the Japanese yen that 

10 are accompanied by a correlated change in the 

11 rate of exchange of the Japanese yen with re12 spect to the United States dollar and other cur13 rencies. 

14 (2) EXCHANGE-RATE MISALIGNMENT.— 

15 (A) IN GENERAL.—The term ‘‘exchange16 rate misalignment’’ means an undervaluation of 

17 the Japanese yen as a result of protracted 

18 large-scale currency intervention by or at the 

19 direction of the Government of Japan in the ex20 change market. An undervaluation exists if the 

21 observed exchange rate for the Japanese yen is 

22 below the rate of exchange that could reason23 ably be expected for the Japanese yen absent 

24 the intervention. 


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1 (B) FACTORS.—In determining whether 

2 exchange-rate misalignment is occurring and a 

3 benefit thereby is conferred, the Secretary in 

4 each case— 

5 (i) shall consider Japan’s— 

6 (I) bilateral balance-of-trade sur7 plus or deficit with the United States; 

8 (II) balance-of-trade surplus or 

9 deficit with its other trading partners 

10 individually and in the aggregate; 

11 (III) foreign direct investment in 

12 its territory; 

13 (IV) currency-specific and aggre14 gate amounts of foreign currency re15 serve holdings; and 

16 (V) mechanisms employed to 

17 maintain the Japanese yen at an un18 dervalued rate of exchange with re19 spect to the United States dollar and 

20 other currencies and, particularly, the 

21 nature, duration, and monetary ex22 penditures of those mechanisms; 

23 (ii) may consider such other economic 

24 factors as are relevant; and 


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1 (iii) shall measure the trade surpluses 

2 or deficits described in subclauses (I) and 

3 (II) of clause (i) with reference to the 

4 trade data reported by the United States 

5 and the other trading partners of Japan, 

6 unless such trade data are not available or 

7 are demonstrably inaccurate, in which case 

8 Japan’s trade data may be relied upon if 

9 shown to be sufficiently accurate and 

10 trustworthy. 

11 (C) COMPUTATION.—In quantifying ex12 change-rate misalignment, the Secretary shall 

13 develop and apply an objective methodology 

14 that is consistent with widely recognized macro15 economic theory and shall rely upon govern16 mentally published and other publicly available 

17 and reliable data. 

18 (3) SECRETARY.—The term ‘‘Secretary’’ means 

19 the Secretary of the Treasury. 

20 SEC. 4. REPORT ON CURRENCY INTERVENTION AND EX21 CHANGE-RATE MISALIGNMENT. 

22 (a) IN GENERAL.—Not later than 180 days after the 

23 date of the enactment of this Act, and every 180 days 

24 thereafter, the Secretary shall submit to Congress a report 

25 on— 


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1 (1) currency intervention by the Government of 

2 Japan with respect to the rate of exchange of the 

3 Japanese yen and the United States dollar and other 

4 currencies since 2000; and 

5 (2) any effort by the Government of Japan to 

6 create an exchange-rate misalignment of the Japa7 nese yen with respect to the United States dollar 

8 and other currencies since March 2004. 

9 (b) CONTENTS OF REPORT.— 

10 (1) CURRENCY INTERVENTION BY THE GOV11 ERNMENT OF JAPAN SINCE 2000.—The report re12 quired by subsection (a) shall include— 

13 (A) a description of all known and re14 ported incidents of direct or indirect currency 

15 intervention by the Government of Japan un16 dertaken to adjust the rate of exchange between 

17 the Japanese yen and the United States dollar 

18 and other currencies since 2000; 

19 (B) a description of all other incidents of 

20 currency intervention by the Government of 

21 Japan that have not been reported but in which 

22 the Secretary knew or suspected the Govern23 ment of Japan had participated; and 

24 (C) for each incident of currency interven25 tion described in subparagraphs (A) and (B), a 


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1 justification for the reasons the United States 

2 did not consider the incident of currency inter3 vention, or report or act upon the incident of 

4 currency intervention, under— 

5 (i) the Exchange Rates and Inter6 national Economic Policy Coordination Act 

7 of 1988 (22 U.S.C. 5301 et seq.); 

8 (ii) title III of the Trade Act of 1974 

9 (19 U.S.C. 2411 et seq.); or 

10 (iii) section 2102(c)(12) of the Bipar11 tisan Trade Promotion Authority Act of 

12 2002 (19 U.S.C. 3802(c)(12)). 

13 (2) EXCHANGE-RATE MISALIGNMENT SINCE

14 MARCH 2004.—The report required by subsection (a) 

15 shall also include a description of any efforts by the 

16 Government of Japan since March 2004 to create or 

17 maintain the exchange-rate misalignment of the Jap18 anese yen with respect to the United States dollar 

19 and other currencies, including through— 

20 (A) statements made by officials of the 

21 Government of Japan regarding the value or 

22 movement of the Japanese yen that affect the 

23 rate of exchange of the Japanese yen with re24 spect to the United States dollar and other cur25 rencies; 


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1 (B) covert exchange rate policies or at2 tempts to increase foreign currency reserve 

3 holdings or attain material global current ac4 count surpluses; 

5 (C) directives that alter investments of 

6 pensions plans and insurance companies in 

7 order to gain an unfair competitive advantage 

8 in international trade; and 

9 (D) any other effort to prevent effective 

10 balance of payments adjustments or to gain an 

11 unfair competitive advantage in international 

12 trade. 

13 SEC. 5. PROPOSAL FOR JOINT UNITED STATES–EUROPEAN 

14 UNION PLAN TO ADDRESS THE EXCHANGE15 RATE MISALIGNMENT OF THE JAPANESE 

16 YEN. 

17 (a) IN GENERAL.—Not later than 60 days after the 

18 date of the enactment of this Act, the Secretary shall sub19 mit to the Committee on Finance of the Senate and the 

20 Committee on Ways and Means of the House of Rep21 resentatives a proposal for a comprehensive joint United 

22 States–European Union plan to address the exchange-rate 

23 misalignment of the Japanese yen with respect to the 

24 United States dollar and other currencies. 


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1 (b) CONSULTATIONS.—The Secretary shall develop 

2 the proposal described in subsection (a) in consultation 

3 with— 

4 (1) the Board of Governors of the Federal Re5 serve System; 

6 (2) the Council of Economic Advisors; 

7 (3) the Secretary of Commerce; and 

8 (4) the Secretary of State. 

9 (c) CONTENTS.—The proposal described in sub10 section (a) shall include a commitment to raise the issue 

11 of the exchange-rate misalignment of the Japanese yen 

12 with respect to the United States dollar and other cur13 rencies at each meeting of the G–7 Finance Ministers and 

14 each meeting of the G–7 Leaders until the Japanese yen 

15 is no longer in exchange-rate misalignment with respect 

16 to the United States dollar and other currencies. 

17 SEC. 6. CONSULTATIONS WITH JAPAN. 

18 Not later than 30 days after the date of the enact19 ment of this Act, the Secretary, in consultation with the 

20 Council of Economic Advisors, shall initiate consultations 

21 with the Government of Japan for the purpose of decreas22 ing the foreign currency reserve holdings of the Govern23 ment of Japan to permit effective balance of payments ad24 justments and to eliminate the unfair competitive advan25 tage in international trade. 


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1 SEC. 7. RESPONSE TO FUTURE CURRENCY INTERVENTION. 

2 In the case of a direct or indirect act of currency 

3 intervention by the Government of Japan that has the ef4 fect of decreasing the rate of exchange of the Japanese 

5 yen with respect to the United States dollar to prevent 

6 effective balance of payments adjustments or to gain an 

7 unfair competitive advantage in international trade, the 

8 Secretary shall immediately take action unilaterally, bilat9 erally, or multilaterally, to dissuade, prevent, or object to 

10 such action. 

11 SEC. 8. MEETING OF THE INTERNATIONAL MONETARY 

12 FUND. 

13 The United States shall call for the convening of a 

14 special meeting of the International Monetary Fund to 

15 reach a multilateral agreement addressing— 

16 (1) the exchange-rate misalignment of the Jap17 anese yen with respect to the United States dollar 

18 and other currencies; 

19 (2) the destabilizing effects of the exchange-rate 

20 misalignment of the Japanese yen; and 

21 (3) the excessive foreign currency reserve hold22 ings of the Government of Japan. 

23 SEC. 9. REPORT ON PROGRESS. 

24 Not later than 180 days after the date of the enact25 ment of this Act, and every 180 days thereafter, the Sec26 retary shall report to the Committee on Finance of the 


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1 Senate and the Committee on Ways and Means of the 

2 House of Representatives on— 

3 (1) the progress made toward decreasing the 

4 foreign currency reserve holdings of the Government 

5 of Japan; 

6 (2) actions taken at meetings of the G–7 Lead7 ers, the G–7 Finance Ministers, and the Inter8 national Monetary Fund regarding the exchange9 rate misalignment of the Japanese yen with respect 

10 to the United States dollar and other currencies; and 

11 (3) the progress toward eliminating the ex12 change-rate misalignment of the Japanese yen with 

13 respect to the United States dollar and other cur14 rencies. 

Æ 


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