WASHINGTON – US President Donald Trump said on March 3 he told leaders of Japan and China they cannot continue to reduce the value of their currencies, as doing so would be unfair to the United States.
“I’ve called President Xi (Jinping), I’ve called the leaders of Japan to say you can’t continue to reduce and break down your currency,” Mr Trump said at the White House.
“You can’t do it because it’s unfair to us. It’s very hard for us to make tractors, Caterpillar here, when Japan, China and other places are killing their currency, meaning driving it down,” he said.
Instead of complaining repeatedly over the phone over such attempts, the US could make up for the disadvantage its manufacturers receive by imposing tariffs, Mr Trump added.
“So all of these things add up. And the way you solve it very easily is with tariffs,” he said.
Japan’s Nikkei share average fell more than 1 per cent on March 4 as Mr Trump’s comments briefly drove up the yen, highlighting the risk Japan’s export-reliant economy faces from uncertainty over Washington’s currency and tariff policies. The yen briefly hit 149.11 to the dollar, the highest since Feb 28.
Asked about Mr Trump’s comments, Japanese Finance Minister Katsunobu Kato said Tokyo was not taking policies directly aimed at weakening the yen.
Mr Kato told a news conference in Tokyo on March 4 that Japan had confirmed its “basic stance on currency policy” with Group of Seven (G-7) countries and with the United States, including at a bilateral meeting with US Treasury Secretary Scott Bessent.
Speaking at a separate news conference, Japanese Economy Minister Ryosei Akazawa said on March 4 the government intervenes in the currency market only when yen movement is “speculative”.
Japanese policymakers have been sensitive to the risk of Mr Trump making explicit comments about the yen and causing market volatility that could hurt its fragile economic recovery.
Prime Minister Shigeru Ishiba said in February he agreed with Mr Trump that the two countries will leave foreign exchange rate matters in the hands of their finance ministers.
While a weak yen gives Japanese exports a boost, Tokyo’s recent forays in the currency market have been to prevent sharp yen falls that inflate import costs and hurt consumption.
Japan’s top currency diplomat Atsushi Mimura last week acknowledged the yen’s rebound back then as reflecting Japan’s solid economic fundamentals and prospects of a near-term interest rate hike by the central bank.
Japan has consistently, and successfully, called for G-7 and G-20 members to reaffirm their agreement that excess volatility in the currency market is undesirable – language Tokyo sees as giving it justification to conduct yen intervention when the currency’s moves are too sharp and driven by speculative trade.
Mr Trump’s criticism of a weak yen and uncertainty on how his tariff threats could affect global growth may complicate the Bank of Japan’s (BOJ) decision on how soon to raise interest rates.
The central bank ended a decade-long, massive stimulus in 2024 on the view that Japan was on the cusp of sustainably pulling out of prolonged deflation and economic stagnation.
With inflation exceeding its 2 per cent target for nearly three years, the BOJ is eyeing further interest rate hikes after raising borrowing costs to 0.5 per cent in January.
A majority of economists polled by Reuters expect the BOJ to hike rates once more this year, most probably during the third quarter, to 0.75 per cent. REUTERS
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