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Paulson Starts Asia Tour in Japan Amid Market Volatility

U.S. Treasury Secretary Henry Paulson kicked off a three-nation Asian tour in Tokyo on Monday amid turmoil in regional stock markets and the dollar's sudden drop against the yen.

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Source: TheTruthAboutMortgage
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Paulson will also meet top leaders in China and South Korea during his five-day swing through Asia, where most markets have plunged ever since Chinese stocks tumbled 9 percent last Tuesday.

Tokyo's Nikkei 225 index plunged 3.34% Monday, while the U.S. dollar meanwhile dropped to around 115 yen from above 120 yen less than a week ago.

In Tokyo, Paulson was expected to meet Prime Minister Shinzo Abe and Finance Minister Koji Omi on Monday evening. Although Japanese officials declined to give details of their agenda, discussions will likely include the current fluctuations in regional stock markets and the dollar's value against the Japanese currency.

Trade between the world's biggest and second-biggest economies will also figure large.

Omi and Paulson are also expected to reaffirm their countries' cooperation on implementing financial sanctions against North Korea in retaliation for its first ever nuclear weapons test last October, Kyodo News agency said. Their meeting precedes a U.S.-North Korea working group meeting in New York on normalizing diplomatic ties.

Paulson is later expected to meet Economy Minister Hiroko Ota and Bank of Japan Gov. Toshihiko Fukui, who recently shepherded the central bank's second interest rate hike since last summer, a quarter-point increase to 0.5%.

China's huge trade gap with the United States will likely be a focus of talks when Paulson heads to Beijing and then delivers a major speech on China's capital markets in Shanghai.

The U.S. trade deficit with China hit a record $232.5 billion last year, prompting more calls by Democrats in the U.S. Congress for the Bush administration to do more to deal with the soaring imbalance.

American is also pressuring China to free up controls on the movement of the yuan against foreign currencies, including the dollar. Critics in Washington say the yuan is artificially undervalued against the dollar and that the difference gives Chinese exports an unfair advantage on the world market.

Some U.S. manufacturers contend that China's currency is undervalued by as much as 40%. That makes Chinese goods cheaper for American consumers and means U.S. products are more expensive in China.

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