KYODO NEWS - Apr 14, 2018 - 12:28 | All, World

The U.S. Treasury Department said Friday it has put Japan, China and four other countries on a list of countries it monitors over what it calls potentially "unfair" currency practices.

The department, however, concluded that no major U.S. trading partner is manipulating its currency to gain an unfair trade advantage.

In a semiannual report to Congress, the department said it has found that six trading partners warrant placement on the "monitoring list" for special attention -- China, Germany, Japan, South Korea, Switzerland and India.

While the department retained the first five countries, India was added in the latest report.

Citing Japan's hefty goods trade surplus with the United States, the report said the "Treasury remains concerned by the persistence of this large bilateral trade imbalance between the United States and Japan."

(U.S. Treasury Secretary Steven Mnuchin)

Such a concern would increase the likelihood that President Donald Trump will demand that Japan reduce its trade surplus with the United States during a meeting with Prime Minister Shinzo Abe on Tuesday and Wednesday in Florida.

According to the report, the improvement in Japanese economic growth and inflation propelled the yen to strengthen 3.6 percent against the U.S. dollar in 2017.

The yen appreciated further against the dollar in early 2018, moving up 6.1 percent from January through the end of March.

"Japanese officials have publicly voiced concern over the appreciation of the yen this year, but Japan has not intervened in the foreign exchange market in over six years," the report said.

"The Treasury's expectation is that in large, free-traded exchange markets, intervention should be reserved only for very exceptional circumstances and with appropriate prior consultations."

The department recommended that Japan promote structural reforms so as to support a sustained expansion of domestic economic activity, create a more sustainable path for long-term growth and help reduce the country's public debt and trade imbalances.

Referring to China's massive goods trade surplus with the United States, the department said Washington is "strongly concerned" by the lack of progress by Beijing in correcting the bilateral trade imbalance.

It demanded that China adhere to its Group of 20 commitments to refrain from engaging in competitive devaluation and ensure greater transparency of Beijing's exchange rate and reserve management operations and goals.

"The Treasury Department is working vigorously to ensure that trade is free, fair and reciprocal so American workers and companies can compete and succeed globally," Treasury Secretary Steven Mnuchin said in a statement.

"We will continue to monitor and combat unfair currency practices, while encouraging policies and reforms to address large trade imbalances," Mnuchin said.