Japanese Prime Minister Shinzo Abe is visiting the U.S. this week, and on his agenda: negotiations for a trade deal between the U.S. and Japan, along with ten other countries. One potential sticking point is the way Japan handles its currency. For the last few years, Japan has pumped more currency into circulation, saying it wants to flight deflation.
“But everyone knows that behind that is definitely a business community that’s has complained for many years that the value of yen too strong,” says Scott Seaman, a senior analyst with the Eurasia Group.
Many Japanese exporters would prefer a weaker yen, so Japan goods become cheaper relative to competitors in other countries. That is why this a trade issue, says Eswar Prasad, an economics professor at Cornell.
“Some people in the U.S. are concerned that by opening U.S. markets, and by tolerating other countries’ policies that drive down the values of their currencies, the U.S. might lose out,” he says.
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