Twice each year, the United States holds up a mirror to the currency practices of its major trading partners, and Japan once again finds its reflection on the watchlist — present but not condemned. The Treasury's biannual report, covering economic behavior through June 2025, kept Japan among ten nations under scrutiny for potentially tilting the currency playing field, while stopping short of the formal designation that would invite sanctions. What distinguishes Japan in this careful accounting is not the absence of intervention, but the presence of transparency — a willingness to be seen that
U.S. keeps Japan on currency watchlist despite transparency praise
Japan is very transparent with respect to foreign exchange operations
Mark
Why does the Treasury keep Japan on the list if it's praising the country's transparency?
Mimi
Because being transparent doesn't erase the underlying facts—Japan has a large trade surplus with the U.S. and a strong current account. The watchlist isn't punishment; it's a flag that says we're paying attention. Transparency is what keeps you from being formally accused.
Mark
So transparency is a shield?
Mimi
More like a mitigating factor. If Japan were hiding its currency moves the way China does, the tone would be very different. The Treasury is saying: we see what you're doing, we know why you're doing it, and we're satisfied you're not being deceptive about it.
Mark
What about Thailand being added? That seems sudden.
Mimi
Not really. Thailand's trade surplus with the U.S. grew enough to trigger the criteria. It's a mechanical addition based on the numbers. But it also shows the Treasury is watching the whole region, not just the usual suspects.
Mark
Does this watchlist actually constrain what Japan can do?
Mimi
It constrains it psychologically and diplomatically. Japan knows it's being measured against specific criteria. If the country started hiding its interventions or the surpluses kept growing, the conversation would shift. The watchlist is a warning that keeps behavior in check.
Mark
And no one got formally designated as a manipulator?
Mimi
Right. That's the important line. Designation means sanctions, trade retaliation, real consequences. The watchlist is the step before that—it's saying we're watching, we're concerned, but we're not punishing you yet.
Il Polso
- Japan's substantial trade and current account surpluses with the United States keep it numerically qualified for heightened concern, meeting two of the three criteria the Treasury uses to flag unfair currency practices.
- No country was formally branded a manipulator this cycle, but the report draws sharp distinctions — China's opacity around exchange rate policy is singled out as a particular source of unease among major trading partners.
- Thailand's addition to the watchlist signals that the roster is not static; growing surpluses can pull new economies into Washington's line of sight at any reporting cycle.
- Japan's open publication of its foreign exchange intervention data — monthly totals, quarterly breakdowns — gave the Treasury reason to treat its currency conduct as restrained rather than predatory, even as the numbers kept it under watch.
- With no sanctions imposed but scrutiny ongoing, Japan occupies an uncertain middle ground: neither cleared nor accused, its next move subject to review in the report that follows.
Twice each year, the United States holds up a mirror to the currency practices of its major trading partners, and Japan once again finds its reflection on the watchlist — present but not condemned. The Treasury's biannual report, covering economic behavior through June 2025, kept Japan among ten nations under scrutiny for potentially tilting the currency playing field, while stopping short of the formal designation that would invite sanctions. What distinguishes Japan in this careful accounting is not the absence of intervention, but the presence of transparency — a willingness to be seen that the Treasury treats as a meaningful form of accountability.
The U.S. Treasury's latest biannual currency report, delivered to Congress on Thursday, kept Japan on its monitoring list alongside nine other major trading partners — China, Germany, Ireland, Singapore, South Korea, Switzerland, Taiwan, Thailand, and Vietnam. Thailand was the only new addition, drawn in by expanding surpluses with the United States. No country was formally designated a currency manipulator, a label that would open the door to American sanctions.
The Treasury applies three benchmarks to assess whether a trading partner has gained an unfair advantage through currency practices: a bilateral trade surplus with the U.S. exceeding $15 billion, a current account surplus above 3 percent of GDP, and a pattern of one-sided foreign exchange market intervention. Japan met the first two, its trade and current account positions both clearing the thresholds by a meaningful margin.
What kept Japan from a harsher judgment was the manner in which it conducts its currency operations. When the yen fell sharply against the dollar in 2024, Tokyo intervened — but did so in the open. Monthly totals of foreign exchange activity are published as a matter of course; quarterly reports break down the specific amounts and currencies involved. The Treasury acknowledged this transparency explicitly, treating it as evidence of restraint and accountability rather than concealment.
The contrast with China was pointed. The report noted that Beijing's lack of clarity around its exchange rate policies sets it apart from other major trading partners — a distinction rooted not in outcomes but in visibility.
For Japan, the result is a kind of supervised limbo: watched but not penalized, scrutinized but not accused. The next biannual assessment will determine whether that position holds or shifts.
The U.S. Treasury Department released its biannual assessment to Congress on Thursday, and Japan's name remained on a list of countries Washington keeps under close watch for potentially manipulating currency markets to gain unfair trade advantages. Nine other major trading partners joined Japan on the monitoring roster: China, Germany, Ireland, Singapore, South Korea, Switzerland, Taiwan, Thailand, and Vietnam. Thailand was the newcomer this cycle, added because of growing trade and current account surpluses with the United States. The rest had occupied the list in the previous report.
No country crossed the line into formal designation as a currency manipulator—a distinction that could trigger U.S. sanctions. But the assessment, which examined economic and currency behavior through June 2025, made clear that the Treasury sees different degrees of concern among its trading partners. China, the report stated plainly, stands apart for its opacity around exchange rate policy and practice. The lack of transparency is what distinguishes it in the Treasury's view.
The Treasury uses three criteria to evaluate whether a nation has tilted the currency playing field. A country lands on the watchlist if it meets at least two of them: a trade surplus with the United States exceeding $15 billion, a current account surplus representing at least 3 percent of gross domestic product, or a pattern of one-sided intervention in foreign exchange markets. Japan qualified on the first two counts. The country had run a substantial trade surplus with America and maintained a current account surplus well above the 3 percent threshold.
What separated Japan from the formal accusation of manipulation, however, was the Treasury's acknowledgment of how the country conducts its currency operations. When the yen weakened sharply against the dollar in 2024, Japan intervened to slow that depreciation. But it did so openly. The government publishes the total value of its foreign exchange interventions each month. It releases the specific daily amounts and currencies involved on a quarterly basis, with a lag. This transparency, the Treasury noted, distinguishes Japan's approach. The country is not hiding what it does.
The distinction matters because it reflects a judgment about intent and conduct, not just outcomes. A country can have large trade surpluses and still be treated differently if it operates with visibility and restraint. Japan's willingness to explain its actions, to let the world see what it is doing and when, counts in its favor even as the numerical facts of its trade position keep it under scrutiny. The Treasury's language suggests that transparency itself is a form of accountability—that a nation willing to be watched and questioned is less of a concern than one that obscures its moves.
For Japan, the watchlist placement is neither a clean bill of health nor a formal accusation. It is a middle ground: acknowledged as a major trading partner whose currency practices warrant continued monitoring, but not condemned as a manipulator. The country remains in a state of observed caution, its actions subject to regular review but not immediate penalty. The next biannual report will determine whether Japan stays in this liminal space or moves in either direction.
Citazioni salienti
China stands out among our major trading partners in its relative lack of transparency around its exchange rate policies and practices.— U.S. Treasury Department report
Japan is very transparent with respect to foreign exchange operations, publishing the total value of its foreign exchange interventions each month and the specific daily amounts and currencies used on a lagged quarterly basis.— U.S. Treasury Department report
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Economy & Finance