Is Candor Good?

No politician wants to support anything that’s weak.  Thus, in the United States, every Administration must assert its commitment to a strong dollar, notwithstanding the policy implications.  Markets then parse the words of the Treasury Secretary to determine whether he really means it when he reaffirms the Administration is in favor of a strong dollar.  Earlier this year, Secretary Geithner was accused of secretly favoring a weak dollar as a way to boosting the economy out of the recession through exports, even as he clearly indicated support for a strong currency.  Of course, he denied the subterfuge, assuring the world that the U.S. currency needs to be “strong.”  No weakling, he.

In Japan, it appears to work differently.  The newly appointed finance minister is actively talking his currency down, even given specific levels that he is targeting.   The risk of this candor was noted in a New York Times article:

Some analysts say Mr. Kan may be less tolerant of a strong yen, though others questioned how the markets would interpret his comments.

The dollar has jumped by half a yen since his remarks.  Since I will be converting dollars to yen next week, I hope he keeps talking.