Former IMF economist advises Japan to strengthen non-U.S. ties
In a recent interview with Jiji Press, Obstfeld expressed concern that U.S. President Donald Trump's administration has taken policy measures, including high tariffs and tax laws, that expand the federal debt and unpredictability, thereby undermining confidence in the dollar.
He also said such actions are driving trade partners to deepen integration with countries other than the United States.
"It will ultimately look attractive to countries to divert their trade links toward deeper integration with other trade partners, just in the interest of protecting themselves from mercurial U.S. policies," Obstfeld explained.
Looking forward, Obstfeld stated, "The world is not going to return for a long time, if ever, to what it was before 2017," when the first Trump administration was inaugurated.
Given this, Obstfeld urged Japan to strengthen its economic partnerships, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and regional frameworks such as ASEAN Plus Three, whose members are the 10-country Association of Southeast Asian Nations as well as Japan, China and South Korea.
Regarding the future of the international monetary system, Obstfeld predicted a "multipolar" era in which the dominance of the U.S. dollar as the key currency would slightly decline, while the presence of the euro and the Chinese yuan would grow.
Citing U.S. policies that could undermine confidence in the dollar, he assessed that the yuan, in particular, has significant potential for the future.
Obstfeld is a senior fellow at the Peterson Institute for International Economics. He has also served as an international adviser to the Bank of Japan's Institute for Monetary and Economic Studies.
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