Akazawa from Japan: The US-Japan trade agreement is not a binding legal obligation

Key Quotes

He advised caution regarding US remarks made during consultations. Akazawa mentioned that a $550 million investment in the US would benefit Japan. He expressed a desire to expedite US vehicle trade, noting that it took Trump over a month to finalize a deal with the UK concerning cars. The US trade contract is characterized as non-binding, indicating that such transactions are primarily agreements between governmental bodies.

Questions on the Japanese Yen

The Japanese Yen (JPY) ranks among the most traded currencies globally. Its value is influenced by the overall performance of the Japanese economy, but particularly by the Bank of Japan’s policies, bond yield differences between Japan and the US, and traders’ sentiment, among other factors.

The Bank of Japan has a crucial role in managing currency value. While it typically intervenes in the market to lower the yen’s value, such actions are infrequent due to political considerations from key trading partners. The ultra-loose monetary policy in place from 2013 to 2024 created a significant policy divergence with other major central banks, leading to depreciation of the yen against major currencies. Recently, there’s been some support for the yen amid a gradual shift away from this loose policy.

Over the last decade, the Bank of Japan’s commitment to ultra-loose monetary policy has increased the gap with other central banks, particularly the US Federal Reserve. This trend contributed to a widening between US and Japanese bond yields since 2010, favoring the US dollar over the yen. The changes expected from the BOJ in 2024, alongside interest cuts from other major banks, might reduce this disparity.

The Japanese yen is frequently viewed as a safe-haven investment. In times of market uncertainty, investors often turn to the yen for its stability and reliability, potentially boosting its value when other currencies are seen as riskier.