Targeting China's Oversupply
Emphasizing the Importance of Korea-US-Japan Cooperation
The finance ministers of Korea, the United States, and Japan gathered together for the first time to share concerns over the recent sharp depreciation of the Korean won and Japanese yen. They also emphasized the importance of trilateral cooperation among the three countries regarding China’s issue of ‘overcapacity.’
Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, who is visiting Washington, USA to attend the G20 Finance Ministers Meeting and the IMF·WB Spring Meetings, attended the Korea-US-Japan Finance Ministers Meeting held at the US Department of the Treasury on the 17th (local time) and took a commemorative photo with Janet Yellen, US Secretary of the Treasury, and Suzuki Shunji, Japanese Minister of Finance.
Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance of Korea, Janet Yellen, U.S. Secretary of the Treasury, and Suzuki Shunichi, Minister of Finance of Japan, adopted a joint declaration at the first Korea-U.S.-Japan finance ministers’ meeting held on the 17th (local time) in Washington D.C., USA. This meeting was a follow-up to the Korea-U.S.-Japan summit held at Camp David, USA, in August last year. After agreeing to hold a trilateral finance ministers’ meeting at that time, they convened the meeting for the first time and adopted a joint declaration. This is regarded as progress in expanding the cooperation framework, which had previously been conducted bilaterally between Korea and the U.S. and between Korea and Japan focusing on diplomatic and security agendas, into a trilateral cooperation framework in the economic and financial sectors.
Reflecting the changed economic and financial environment since last year’s summit, the three finance ministers held additional discussions on the instability in the foreign exchange markets of Korea and Japan. The joint declaration included the phrase, “We share the recognition of concerns expressed by Japan and Korea regarding the recent sharp depreciation of the yen and won.” The U.S. also agreed to share the concerns of Korea and Japan that the recent sharp depreciation of the won and yen is detached from fundamentals. It is unusual for the U.S. government to directly comment on exchange rates formed in the foreign exchange market, so this is interpreted as reflecting the positions of the Korean and Japanese governments to the greatest extent possible.
Amid fading expectations of a rate cut by the U.S. Federal Reserve (Fed) and escalating geopolitical risks in the Middle East, the won-dollar exchange rate surpassed the 1,400 won level intraday for the first time in one year and five months, while the Japanese yen also recorded the lowest level in about 34 years at the 154 yen range. The finance ministers of Korea and Japan issued a joint verbal intervention statement for the first time ever the day before.
The meeting also emphasized the importance of trilateral cooperation to address China’s overcapacity problem. Cooperation measures among the three countries to respond to overcapacity in key sectors were included on the agenda for the first time. The three finance ministers shared the recognition that trilateral cooperation is important to respond to non-market measures such as overcapacity. Although China was not directly mentioned as the main actor of overproduction, considering that Secretary Yellen, who visited China on the 5th, pointed out issues such as the Chinese government supporting domestic industries like batteries, semiconductors, and steel through subsidies, resulting in overcapacity problems, this is interpreted as targeting China.
Discussions were also held on sanctions against North Korea and Russia, reforms of multilateral development banks (MDBs), and support for Pacific island countries, which were topics discussed at the previous summit. They confirmed the use of each country’s independent sanction measures in response to Russia and North Korea. They agreed to continue working-level cooperation to further discuss the mentioned tasks. The declaration also included the content “to continue working-level consultations,” demonstrating strong trilateral cooperation intentions.
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