Congressional Democrats challenge Treasury on Japanese currency

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Democratic members of the US House of Representatives have sent a letter to Treasury Secretary Hank Paulson in an effort to pressure the Bush administration to in turn put pressure on the Japanese to strengthen the yen. The letter claims that the Japanese government is deliberately pursuing a policy to keep the yen weak in order to benefit Japanese companies that produce goods for export, putting US manufacturers at a disadvantage.A member of the Japanese cabinets council on fiscal and economic responsibility countered that the government has not intervened in any way in relation to the yen in nearly three years and that the yens current weakness is a result of market fundamentals. Treasury secretary Paulson has offered the same conclusion recently, and so the letter from House Democrats could lead to a confrontation with the administration. Mr. Paulson, who was formerly the head of Goldman Sachs, has worked to keep Treasury resistant to Congressional attempts to influence policy on currencies.One fact tends to add credence to the Democratic argument: The percentage of the Japanese gross domestic product made up of exports, currently at 16 percent of the Japanese GDP, is higher than it was when the US forced Japan to revalue its currency in 1985.