Japan’s Currency Strategy Amid US Trade Talks
TOKYO – Japan is not expected to bow to US pressure to deliberately strengthen the yen, despite the recent criticism aimed at President Donald Trump’s significant trade surplus with the United States, according to former top currency diplomat Masatsugawa.
Trump has been vocal about addressing the US trade deficit and has suggested that Japan will maintain a weak yen, which has led to speculation about potential influence on Tokyo to adjust the yen’s value. This weak yen tends to benefit Japanese manufacturers, giving them an edge in exports.
Asakawa mentioned that the dollar continues to hold its ground as a global reserve currency. However, with Trump announcing new “mutual” tariffs scheduled for April 2, the pressure to negotiate could become more palpable.
“Should the dollar decline and lead to increased inflation in the US, it’s likely that Treasury Secretary Scott Bescent is well aware of the implications,” he noted in a later interview.
Asakawa also pointed out that there hasn’t been any solid discussions between Bescent and Japanese Finance Minister Katsunobu about currency issues during trade talks. When asked whether a scenario akin to the 1985 Plaza Agreement—which prompted the US to devalue its currency—could arise, he dismissed that possibility.
“A second Plaza agreement seems unlikely,” he stated, emphasizing that he has maintained close connections with current policymakers. He served as Japan’s Deputy Minister of International Affairs from 2015 to 2019 and was involved in crucial trade and currency discussions with the US during Trump’s initial term.
Prime Minister Abe previously persuaded Trump to leave currency matters to financial leaders, which, according to Asakawa, seems to be a lasting perspective within the US administration.
At the recent in-person meeting, Kato mentioned to Bessent that they would keep the dialogue on monetary policy constructive, although they didn’t delve into setting targets for the yen or managing its movement. Notably, the dollar index, which measures the dollar’s value against a basket of six currencies, has seen a drop of about 11% this year—marking the worst performance in decades. The dollar has also fallen 7.5% against the yen.
The situation around bilateral trade discussions remains uncertain, as Asakawa pointed out that Trump hasn’t shown much interest in Japan’s attempts to negotiate concessions on auto tariffs.
Recently, Trump intensified the trade war, announcing tariffs that could approach 25% unless Japan can secure an agreement with Washington. Japan, however, has various strategies it could deploy in its discussions with the US, such as pledges to boost investment in the US, reassessing domestic auto safety standards, and contributing to Alaska’s liquefied natural gas project.
“It’s more effective to bundle these initiatives together rather than presenting them piece by piece,” he advised.
After serving as head of the Asian Development Bank until February, Asakawa now leads the Tokyo-based International Monetary Association.
