With the recent announcement of a trade agreement between the United States and Japan, currency issues have come to the forefront of discussions between the two nations.

The agreement, which was announced on September 25, 2019, covers a broad range of topics related to trade between the United States and Japan, including agriculture, digital trade, and intellectual property. One of the most significant issues addressed in the agreement, however, is currency.

Under the terms of the agreement, the United States and Japan have agreed to refrain from using currency devaluation as a means of gaining a competitive edge in international trade. This agreement is significant because it marks the first time that a trade agreement has explicitly addressed currency issues.

Currency devaluation occurs when a country intentionally lowers the value of its currency in order to make its exports more competitive on the international market. This tactic can be effective in the short term, but it can have serious consequences over the long term, including inflation and trade imbalances.

The new trade agreement between the United States and Japan aims to prevent these negative consequences by encouraging both countries to maintain stable currencies. Specifically, the agreement states that both countries will ”respect the independence of monetary policy and refrain from competitive devaluation.”

This agreement is likely to have significant implications for both countries` economies. For the United States, the agreement could help to address the country`s trade deficit with Japan, which has been a persistent issue in recent years. By preventing currency devaluation, the agreement could encourage Japan to import more goods from the United States, thereby boosting U.S. exports.

Similarly, Japan could benefit from the agreement by securing a stable economic environment for its exports. Japan has long been known for its strong yen, which has made its exports more expensive on the international market. By refraining from currency devaluation, Japan could avoid exacerbating this problem and continue to grow its export market.

Overall, the new trade agreement between the United States and Japan is a significant step forward in the effort to create a more stable and equitable global trading system. By addressing currency issues head-on, the agreement could help to prevent the kind of economic imbalances that have plagued international trade for decades.