Yellen: "We Do Not Seek a Weak Dollar... Exchange Rates Should Be Left to the Market" (Comprehensive)

Expressed Intention to Raise Corporate Tax Rates

▲Janet Yellen, Nominee for Secretary of the Treasury [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] Janet Yellen, former Chair of the Federal Reserve (Fed) and nominee for the next Treasury Secretary under the Joe Biden administration, stated that she will not pursue an artificial weak dollar policy to improve the trade balance. She also expressed her intention to raise the corporate tax rate.

At the Senate Finance Committee confirmation hearing held via video conference on the 19th (local time), Yellen said firmly, "I do not seek an artificially weak dollar," adding, "I will not tolerate attempts by other countries to do so either."

She also added, "The value of the dollar and other currencies should be determined by the market."

Foreign media gave mixed reactions to Yellen’s remarks. Bloomberg News explained, "This suggests a return to the ‘strong dollar’ policy stance that has been in place since the Bill Clinton administration." However, some interpret that she did not explicitly endorse the strong dollar policy.

The strong dollar policy was effectively abandoned during the Donald Trump administration. Treasury Secretary Steven Mnuchin once said, "An excessively strong dollar harms the U.S. economy."

Regarding China, Yellen strongly criticized the country as being responsible for "terrible human rights violations." She said, "China is clearly our most important strategic competitor," and added, "We must fight against China’s unfair and illegal practices."

Yellen indicated the possibility of raising the corporate tax rate by stating, "Even if corporate taxes rise somewhat, it will ensure the competitiveness of American companies." However, she explained that the timing would be after overcoming the economic recession caused by COVID-19. The Trump administration lowered the corporate tax rate from the previous 35% to 21% in 2017, but President-elect Biden has pledged to raise it back to 28%.

She also gave a positive signal regarding the issuance of 50-year U.S. Treasury bonds. When asked whether the possibility of issuing 50-year bonds should be reconsidered, Yellen said, "I am always open to that," adding, "Issuing long-term bonds when interest rates are low has several advantages." She further mentioned that they would investigate potential demand for 50-year bonds.

Yellen urged for ‘big action’ to respond to the economic recession caused by COVID-19. She warned, "Without further measures, we will have to endure a longer and more painful recession," signaling a large-scale additional stimulus package. Earlier, President-elect Biden unveiled an additional stimulus plan worth $1.9 trillion (approximately 2,100 trillion won).

On this day, the New York stock market closed higher, buoyed by Yellen’s supportive remarks on economic stimulus. The Dow Jones Industrial Average rose 0.38% to 30,930.52, the S&P 500 increased 0.81% to 3,798.91, and the Nasdaq Composite jumped 1.53% to 13,197.18.