Chen pledges to talks on tackling yen devaluation


By Ted Chen, The China Post

TAIPEI, Taiwan — Premier Sean Chen yesterday pledged government action to hold talks with importers about reducing retail prices for Japanese goods, amid efforts by Tokyo to boost its competitiveness through devaluing the yen. Chen said that Japan’s recent monetary initiative will adversely affect exporters but benefit importers, and emphasized that the administration is poised to react with appropriate measures.

In light of the anticipated windfall for importers of Japanese products, Chen said he will appoint the Ministry of Economic Affairs to mediate price reduction negotiations. These would be aimed at ensuring consumers also benefit from the drop in prices for Japanese goods.

The premier also urged exporting companies to take measures to mitigate the adverse effects of currency fluctuations and preserve their competitiveness in the international market.

Chen suggested that Japan’s aggressive loosening of monetary policy is a response to the U.S. Federal Reserve’s third round of quantitative easing (QE3), which brought an influx of capital into Asia and developing economies. However, in contrast to conventions aimed at limiting inflation, Japan’s monetary policy revolves around a set inflation target — a practice used since the 1990s.

In anticipation of the possible upward pressure on other Asian currencies, including the New Taiwan dollar, the central bank has been tasked with monitoring the currency fluctuations of Taiwan’s main trade rivals such as South Korea and China.

According to Chen, relations between the industries of Taiwan and Japan are symbiotic, with Taiwan relying on Japan for vital parts, materials and manufacturing process technologies. For the time being, whether the yen’s devaluation will impact the willingness of Japanese to invest in Taiwan remains uncertain, and the administration will continue to leverage the advantages of the Economic Cooperation Framework Agreement to strengthen Taiwan-Japan collaboration in conjunction with the Ministry of Economic Affairs, said Chen.

Economic Minister Shih Yen-shiang (施顏祥) yesterday stated that due to the lack of a detailed announcement of Japanese monetary policy, it is difficult to assess its effects on the relations between industries in the two countries. However, preliminary studies do not indicate a significant effect.

Shih emphasized that he views the Japanese government’s proposed plan to allocate over 10 trillion yen to expanding its national infrastructure as a valuable opportunity for Taiwanese businesses, for example for suppliers of raw materials.

In response to how the government will carry out the task of mitigating the effects of currency fluctuations and to stay competitive, Shih said his ministry will work with large-scale exporters such as petroleum and medium machine tool companies to formulate appropriate solutions.