September 15th, 2010
09:05 AM GMT
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On Wednesday, when the Japanese yen hit 82 per U.S. dollar, the government of Prime Minister Naota Kan made good on weeks of threats and ordered the Bank of Japan to begin selling yen to counteract its steep rise.

Meanwhile, concern in Washington about how weak the yuan is trading against the U.S. dollar is threatening to boil over again as U.S. Congressional midterm elections near. Beijing loosened the tight peg of its currency to the U.S. dollar in June by allowing the yuan to appreciate. However, the currency has only increased one percent in that time

So what’s the difference between Japan’s “intervention” and accusations against China about currency “manipulation”?

In the broadest terms, nothing.

Central banks act to stop a currency’s increase or decrease in value through the laws of supply and demand. Japan’s bid to decrease the value of the yen is muscled by the government selling yen – forcing down the price of the yen, because there’s more yen available. Tokyo hopes that will keep currency speculators from driving the yen even higher.

Sometimes governments work together to help one nation’s currency, such as in 1998 when the U.S. and Japan worked together to buy $4 billion worth of yen to prop up the currency, which was trading at 140 against the dollar as the Asian Financial Crisis raged. There’s little chance in Japan’s current yen dilemma that any foreign governments in Europe or North America will come to the country’s aid.

Meanwhile, the rhetoric from U.S. politicians is on the rise as critics there argue that the yuan is undervalued by more than 30 percent - meaning Beijing is pumping the market with yuan to keep its value low.

So the difference between “intervention” and “manipulation,” in economic terms, is just plain semantics. The politics of the terminology, however, is an entirely different matter.



soundoff (25 Responses)
  1. hachimada

    US is the biggest currency manipulator as it's printing money like mad for driving down the USD value. China, on the other hand, did not apply "quantum easing" policy, but it's accused of "manipulating" currency. How come? The world is crazy.

    September 15, 2010 at 9:45 am |
  2. David Fu

    I don't think it is about manipulation from China for it is a free market and China had the right to diversify its foreign risk. Besides, it is too hard to export into JP market and with yen appreciation, it is good for JP to spend their money to those developing countries. It means the work is getting equal on living standard.

    September 15, 2010 at 10:04 am |
  3. Steve Thompson

    Japan will have to intervene in the market more than once if they wish to suppress the value of the yen to the point where out-of-country consumers can afford their exports. If they don't, their economy that is already suffering from deflation, crippling debt and one of the oldest demographics on earth, will reach the tipping point even faster. Here's some information on the economic issues facing Japan:

    http://viableopposition.blogspot.com/2010/08/japan-are-three-ds-going-to-kill-its.html

    September 15, 2010 at 11:28 am |
  4. James

    Nice one Kevin.

    September 15, 2010 at 12:03 pm |
  5. son of god

    Agree with hachi made

    September 15, 2010 at 12:10 pm |
  6. hhidong

    stupid japan government always donging stupid work and destroy all over the wold. No brain people

    September 15, 2010 at 12:22 pm |
  7. hhidong

    japan economical system already destroyed not because of the yen currency but because of the wrong way to doing their business.

    September 15, 2010 at 12:25 pm |
  8. youngkeeper

    Just be different in American words.

    September 15, 2010 at 12:26 pm |
  9. cn

    US is the biggest currency manipulator as it's printing money like mad for driving down the USD value. China, on the other hand, did not apply "quantum easing" policy, but it's accused of "manipulating" currency. How come? The world is crazy

    September 15, 2010 at 1:33 pm |
  10. BB

    Hachimada: The US backs its currency with debt bonds. China, in turn, buys those bonds–at a loss–which keeps the dollar value high versus the Yuan. Why? Because if the dollar were to drop in value (from just printing money without selling the debt-backing) it would hurt exports from China both in the reduced ability for Americans to buy Chinese goods, and more attractive cheap US exports.

    Of course that seems like a bad thing for China, and it is except for the fact that it allows China's economy to keep "growing" due to production, and keeping its populace content. If growth were to stop, or overheat and collapse, there'd be rampant unemployment across China and millions of unhappy, rebellious workers that would be a force to contend with.

    Japan is trying to reduce the value of its own currency to make its own exports more attractive. The lower the value of the currency, the lower the export prices. The EU values having a high-valued currency (witin reason) as is a good thing, but they do more inter-EU-state trade than export-centric economies like those in Asia. The US is also somewhat like that because of inter-state trade and buying a lot of imports from places like Asia.

    September 15, 2010 at 1:35 pm |
  11. LOL

    It's about time to realize that Obama administration is not firm about China or Japan because US does it too...

    It's high time to relaize that ALL good nations that have a brain do manipulate their currency to get an advantage for their economy. EVery nation doe sit.

    September 15, 2010 at 4:27 pm |
  12. Rich

    It’s not an issue of semantics, it is an issue of degree.

    Business relies on cooperation and mutual benefit.
    If one party in a transaction continues to push an advantage to the onerous of the other party the transaction will eventually need new terms or terminate.

    In other words; you can get away with some delays of game and false starts, but start pulling enough personal fouls and cheating; then game over.

    September 15, 2010 at 6:06 pm |
  13. WXC

    "Hachimada: The US backs its currency with debt bonds. China, in turn, buys those bonds–at a loss–which keeps the dollar value high versus the Yuan. Why? Because if the dollar were to drop in value (from just printing money without selling the debt-backing) it would hurt exports from China both in the reduced ability for Americans to buy Chinese goods, and more attractive cheap US exports."

    ? Why does US sell its bonds to China then, would not it be a pretty dumb thing to do if what you said above was true?

    From what I see it's like most of the times US is the one who tries to intervene in other country's business rather than the other way round. Would US be happy if China stopped buying its bonds? Hold another conference?

    September 16, 2010 at 6:17 am |
  14. james kubis

    the Chinese premier is visiting the US. this week . i was wondering if you could do a piece on this visit . as to the effects on the US. economy and the dismal job outlook in then US.

    September 16, 2010 at 12:08 pm |
  15. Kevin

    Really fed up with US keeps telling others what to do n how to do on everything, big headed.Cn't agree more tht there is no difference on economical terms, how it's called is all about politics. A nation's government has every right to use its monetary polices to avoid huge risks, n every government on this planet do this. Why the US is making suck a big noise on China's then? well, simply becoz US cn't resolve their deficit n unemployment problems, so they try to blur the focus n to put the blame on China.

    September 17, 2010 at 1:41 am |
  16. bulleto

    instead of bad economy... the higher currency was also have the advantages. For example.. with higher currency the company from thus country might buy the company from others company...
    and for the ppl... it good to have vacations.... (spending less)...

    September 17, 2010 at 7:58 am |
  17. Andre

    Ever noticed when theres is some news of china always the first coments are pro China? China is a big dictatorship and so they have tens of thousands employed just erasing harmful coments in their national internet blogs and making possitive opinion for them in internatinal ones.
    Dont pay much heed to these kinds of comments they dont make sense
    causa dictatorship cations dont make sense except for the dictators themselfs. Mao's Boys

    And i Dare Cnn to let this comment get publish, as i am most sure they will not.

    September 17, 2010 at 8:03 am |
  18. Alexandre Bertoncello

    Sorry but, all the time and all the countries do “currency manipulation”

    September 17, 2010 at 9:03 am |
  19. lake

    Because the US owns much greater media power, their politicians make everything they hate looks like things the whole world hate. At least I don't care if they hate or not. Everycountry should be as selfish as the US.

    September 17, 2010 at 2:42 pm |
  20. desert voice

    Each country has a right to do what it feels necessary, even to hang itself on a rope! But each country also has a right to prosper and think constructively! Here are some solutions of my own. There is a lesson here about one world currency, which I have long been advocated. Moreover, every nation ought to be allowed to print as much money as it needs on a one-time basis, up to 30% of its GNP. This would spur a gigantic resurgence of economies and markets in the world, benefitting overnight bilkliobns of people, wiping out hunger, and stopping wars! Never since the biblical times has such universal forgiveness of debt has been tried!

    September 17, 2010 at 7:23 pm |
  21. hachimada

    World currency is a good idea, and was pressed hard by BRIC countries in the last G20 meeting. But guess who was the strongest opponent of this idea? It's US. For almost half of the century, US used and abused the status of the USD as the sole international reserve currency for its own benefits. I am sure US will do whatever needed to protect that status.

    September 18, 2010 at 9:55 pm |
  22. Canada G

    Andre I lived in China for many years. Yes there is a lot of censorship etc.
    But if you going to throw comments get your facts right:
    A> China is not a dictatorship
    B> the reason for the comments so quick is China is VERY patriotic (maybe a little too much so) and try to always say good things
    C> Mao boys?? boy you are out of date

    Good comment from Rich. It is totally a case of how much is too much. Each country does manipulate (even the US). But manipulate and control/suppress is 2 different things

    September 19, 2010 at 1:21 pm |
  23. Andre

    Canada G

    You really are a inocent one arent you?
    Dictactorship to be sustain means control of personal freedom and information freedom, both of witch the China comunist party has the firmest of grips, it is well known there his hundreds of unoficial jails all across China so that the party founded by Mao and prepetuaded by his
    comunist partr heirs tortures brainwashes and assasinates everyone they deem a threat. The world just doesnt do anything about it cause China e a enever ending resource of cheap labour and cheap meand of production. Wake up and smell reality friend.
    We sould all wake up to it, they are gansters.

    September 23, 2010 at 8:09 am |
  24. aRtFuL

    Andre:

    Dictatorship is a tyrannical system of rule by 1 man.

    China is more like a oligarchy authoritarian regime (rule by the party, but within the party they do vote for the leadership and issues). It is really not much different than what Russia is now, except China is more stable and the population is more content.

    So it seems you have very limited understanding of the politics of China.

    All that crap that you said about Mao blah blah blah are so outdated. You need to wake up from the cold wars.

    You said "We sould all wake up to it, they are all gansters"... not only did you spell the most simple words wrong in that statement but it is both bias and racist. If you don't like Asians just say so instead of hiding behind a veil of accusing China of this and that – that way at least you are an honest racist.

    September 24, 2010 at 4:49 am |
  25. business.blogs.cnn.com

    Japans yen intervention chinas yuan manipulation.. Neat :)

    April 17, 2011 at 4:58 pm |

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