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Last Updated: Monday, 1 September, 2003, 11:51 GMT 12:51 UK
US tackles Asia's currency issues
John Snow and Heizo Takenaka
The first of many meetings
US Treasury Secretary John Snow has begun a series of meetings with Asian leaders to discuss global economic growth.

The delicate issue of currency policy - which was expected to dominate the meetings - has been alluded to, but not elaborated upon, following Monday's meetings with Japan's Economy Minister Heizo Takenaka and Prime Minister Junichiro Koizumi.

"In the course of our discussions, currency issues arose. My long-held view on that subject is that a well-functioning international financial system is one that's based on flexible exchange rates determined in competitive markets," Mr Snow said at a news conference.

The US is concerned that artificially low values for the Japanese yen and the Chinese yuan are hurting US manufacturers which struggle to compete with cheap Asian imports.

Ahead of the meetings, the Japanese press had speculated that Mr Snow would ask Japan directly to stop intervening in the currency markets.

In Tokyo, any complaints about the weakness of the yen are likely to be unpopular, since it underpins the success of Japanese exports and the country's potential to drag itself out of a 10 year recession.


The topic is even more controversial in Beijing, where Mr Snow will arrive on Tuesday.

US campaigners increased pressure on Mr Snow as he started his trip, with about 80 groups saying they may demand an investigation into China's currency policies that could lead to trade sanctions.

Shopping for computers in Beijing
The yuan has underpinned China's boom
Last week, the US National Association of Manufacturers (NAM) argued that the dollar was 15% overvalued, and particularly blamed the cheap yuan for causing job losses in American factories.

The yuan is pegged at about 8.3 to the dollar, a rate the NAM said was up to 40% undervalued, giving China's exporters an unfair advantage and making its imports expensive.

The competitiveness of China's yuan has helped foster the environment for the world's fastest growing manufacturing base.

Many economists argue that China should allow the yuan to float freely on international markets, or at least should rethink the value of its dollar peg.

Mr Snow will join a meeting of Asian finance ministers in Thailand on Thursday.

The BBC's Susie Salmond
"For Mr Snow it is a question of balance - putting gentle pressure on Tokyo and Beijing"

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