US-based General Motors (GM), the world's largest automotive maker, accused Japan yesterday of currency manipulation giving Japanese automakers a huge competitive advantage in the US market and causing significant harm to US manufacturers.
The company charged that Japan's weak yen policy gave its exporters an outright annual subsidy of up to US$12,000 per vehicle exported to the US, giving an expected windfall of US$2 billion to Japan's automakers.
"This subsidy has both facilitated the expansion of Japanese companies in the US and succeeded in keeping US-built automobiles out of Japan," GM chief economist Mustafa Mohatarem told a Congressional hearing.
The impact of the sustained currency manipulation is a key reason for a plethora of problems facing US-owned auto manufacturers, Mohatarem told a US-Japan trade hearing held by the House of Representatives' Committee on Ways and Means.
"However, it is frustrating, really unbelievable, to many of us in this business and the US manufacturing sector that the Japanese government's extraordinary US$420 billion currency manipulation program has gone unquestioned and unchallenged, while China has become the sole focus of attention as the threat to US competitiveness," he said.
Lawmakers criticized the government for not being tough with Japan on its currency policy and sought an explanation from David Loevinger, deputy assistant secretary at the US Treasury, among government officials at the hearing.
"We hear the message," Loevinger said.
US President George W. Bush's administration has discussed foreign exchange market issues with Tokyo officials and "will continue to strongly express our views that major economies should have flexible exchange rates, determined in the market with intervention kept to a minimum," he said.
Japanese authorities have not intervened in the foreign exchange market since March last year, Loevinger said.
Despite strong sales, Mohatarem said US auto manufacturers and suppliers were struggling to turn profits, auto workers had been laid off, credit ratings for auto companies had been downgraded and many suppliers were faced with bankruptcy.
Last year, the US-Japan bilateral automotive trade deficit reached US$44.2 billion, making it the largest sectoral trade deficit the US maintains with any country. Automotive trade represented over two-thirds of last year's total deficit.
Mohatarem said the yen dropped to the current level of 111 to the dollar from 105 earlier this year due in part to ongoing "jawboning" and verbal intervention by high-ranking Japanese officials.
He cited ¥90 to ¥100 per dollar as "the commonly accepted range."
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