Ishiba Denies Japan Weakening Yen After Trump Tariff Warning

Yahoo

04-03-2025

(Bloomberg) -- Japanese Prime Minister Shigeru Ishiba denied that Tokyo is trying to weaken its currency after President Donald Trump bumped the yen by accusing Japan and China of gaining an unfair advantage through foreign exchange policy. He threatened to use tariffs as a remedy.
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'Japan hasn't adopted a so-called yen-weakening policy,' Ishiba said in parliament, adding his voice to a chorus of senior Japanese officials playing down Trump's comments. He added that close communication over currency policy would continue between the finance ministers of both nations, just as it did during Trump's first administration.
Following Trump's remarks, the yen broke through the 150 mark against the dollar, with gains briefly taking it to 148.60 mid-morning Tuesday in Tokyo. By 2pm Japan's currency had pared gains to around 149.20.
While officials in Tokyo were quick to try and push back against the idea of any currency issue between Japan and the US, the president's comments will likely reinforce the view among traders that there's little to be gained from betting on a renewed weakening of the yen.
'The first remarks by President Trump since taking office to curb the weakening of the yen sent a shock through the foreign exchange market,' said Takeru Yamamoto, a trader at Sumitomo Mitsui Trust Bank in New York. The comments make it difficult to build yen-selling positions going forward, he added.
Trump said he warned Chinese President Xi Jinping and Japanese leaders that they cannot continue to 'reduce and break down' their currencies. Trump added that the easy solution was to apply tariffs.
'Whether it's the yuan or the yen in Japan or the yuan in China — when they drop them down, that gives us — that puts us at a very unfair disadvantage,' Trump said at the White House on Monday. 'It's very hard for us to make tractors — Caterpillar — here, when Japan, China, and other places are killing their currency.'
Ishiba said he hadn't received a phone call on the matter from the US president.
Japanese Finance Minister Katsunobu Kato told reporters earlier in the day that Tokyo's stance 'can be understood by looking at our recent currency interventions.'
The finance ministry spent around $100 billion intervening in markets last year, not to weaken the yen but rather to prop it up, as consumers and businesses struggled to cope with higher prices partly driven by the weaker currency.
One of the main sources of weakness in Japan's currency has been the Bank of Japan's ultra low interest rates in comparison to elevated borrowing costs in the US, a difference that has helped divert money out of the yen and into dollar-based assets.
The BOJ raised interest rates for the first time in 17 years a year ago and has pushed them up twice more since then. But at 0.5%, Japan's main policy rate is still some distance from the Federal Reserve's upper bound of 4.5%. While BOJ Governor Kazuo Ueda and other board members have reiterated the bank's commitment to keep raising rates if the price outlook materializes, surveyed economists see the central bank waiting until July before hiking again.
Kato said he confirmed Japan's basic stance on its currency policy with US Treasury Secretary Scott Bessent at the Group of Seven nations and other forums. Kato met Bessent in January, where the pair said they would work closely on currency matters.
Yoshimasa Hayashi, Japan's top government spokesman, largely echoed Kato's comments, adding that the two finance chiefs would continue to coordinate closely on currency issues.
Weakness in the currency has ramped up import costs for Japanese businesses and fueled inflation for consumers. Overall inflation is running at 4%. The cost-of-living crunch has led to voter dissatisfaction, creating a headache for Ishiba as a national election approaches this summer.
--With assistance from Masahiro Hidaka, Mia Glass, Takashi Hirokawa and Masaki Kondo.
(Adds officials' comments, more background)
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