washington<u+2014>the u.s. treasury department sharply toned down its criticism of china and other asian export giants in its latest currency report to congress on friday, an assessment in stark contrast to the heated election-year rhetoric targeting beijing<u+2019>s exchange-rate policy as a central threat to the u.s. economy. treasury said authorities in china, japan and korea have resisted the temptation to use their currencies to gain a stronger export advantage, a marked turnaround from recent years and the fruits of a successful global campaign. preserving a two-decade precedent, no country was named a currency manipulator. <u+201c>treasury has been working aggressively to address exchange-rate issues,<u+201d> the department said in its biannual report. <u+201c>this strategy has produced results.<u+201d> fred bergsten, a senior fellow at the peterson institute for international economics who was long a critic of china<u+2019>s currency policy, said it is too early for the administration to declare victory. <u+201c>but i do think that a new set of currency-policy norms<u+2014>almost cultural norms<u+2014>have evolved amid a steady drumbeat against currency intervention,<u+201d> mr. bergsten said. the administration<u+2019>s trumpeting of its financial diplomacy runs counter to the narrative propounded by republican presidential nominee donald trump . capitalizing on the economic pain that china<u+2019>s rise and past currency manipulation caused over the past two decades, mr. trump has said he would slap china with a slew of tariffs in retaliation for beijing<u+2019>s trade and exchange-rate policies. fighting currency manipulation has been a priority for the administration because cheaper exchange rates undermine u.s. exports. the country<u+2019>s economic expansion has been weighed down by a strong dollar in part because the u.s. is a haven in a world of weak and shaky growth. but china<u+2019>s steady appreciation of the yuan over the past decade has pushed it to levels the international monetary fund say are roughly in line with market fundamentals. beijing is slowly making its currency a market-determined exchange rate, in part to gain elite, international-reserve status . and though the yuan has fallen over the past year against the dollar as its economy slows faster than expected, chinese officials have spent more than a half-trillion dollars over the past year to prevent the currency from depreciating faster and further. similarly, officials in tokyo have resisted strengthening domestic calls to intervene in the yen as investors buy the currency to higher and higher levels. and korea, which has repeatedly intervened in its currency in the past, has kept the won from falling over the past year, <u+201c>representing a shift from several years of asymmetric intervention,<u+201d> the treasury department said. instead of using the threat of trade sanctions to whip currency offenders into compliance, treasury has instead sought to build international peer pressure and leverage its financial diplomacy against damaging exchange-rate policies. that has become more important as other trade irritants between the u.s. and china have moved more to the fore and as it tries to negotiate a pan-pacific trade deal. <u+201c>it has become much more difficult for any major economy to act unilaterally to depress its currency,<u+201d> said ted truman, a former senior financial diplomat at the u.s. treasury and federal reserve. for japan to intervene now, for example, <u+201c>the hurdle is now very high<u+201d> after tokyo signed numerous commitments against intervention and has refrained from action for nearly five years. to be sure, treasury is still critical of the six countries named in its new <u+201c>monitoring list<u+201d> of potential currency offenders. <u+201c>more transparency over exchange rate management and goals<u+201d> and strong adherence to its international commitments on currency policies <u+201c>will enhance the credibility of china<u+2019>s exchange rate regime,<u+201d> the department said. the administration once again chastised germany for relying too much on exports to juice growth and not using its budget to juice anemic growth in the eurozone. europe<u+2019>s powerhouse now has the world<u+2019>s largest trade surplus in dollar terms. japan should overhaul its economy to alleviate the burden on monetary policy to revive its long-dormant economy, it said. south korea needs to be more transparent about its exchange rate operations, treasury said. switzerland joined taiwan as economic anomalies that meet some of treasury<u+2019>s criteria for its name-and-shame list, but aren<u+2019>t countries with currency policies that are a threat to american growth. u.s. treasury secretary jacob lew also has said repeatedly that the true test of whether china is moving toward a market-determined exchange rate is whether beijing allows the currency to appreciate when market pressures reverse. some economists say the test may come sooner. many analysts say if growth looks to falter further in china, beijing could give in to the political pressures to allow a stronger depreciation of the yuan. china<u+2019>s exports suffered a 10% year-over-year fall in september, reviving some of those concerns. but so far, the yuan<u+2019>s fall against the dollar reflects more the greenback<u+2019>s strengthening and beijing<u+2019>s decision to allow the currency to track a basket of other currencies more closely. write to ian talley at ian.talley@wsj.com
treasury department tones down criticism of china, other trading partners  - wsj
ian talley