U.S. Holds Fire Over Yen Exchange Rate Targets; Bessent Said to Understand Negative Impact on Markets

By Shinnosuke Kurama and Hiroyuki Tanaka / Yomiuri Shimbun Staff Writer

17:11 JST, April 26, 2025

WASHINGTON — The administration of U.S. President Donald Trump has shown discontent with the weak yen and the strong dollar. But at a Japan-U.S. finance ministerial meeting held on Thursday, the idea of setting a target for the yen-dollar exchange rate was put on hold at least for now, seemingly to avoid sparking fresh turmoil in the financial markets.

Nonetheless, the markets are deepening their wariness over the U.S. administration’s next moves.

Strong discontent

The bilateral meeting between Japanese Finance Minister Katsunobu Kato and U.S. Treasury Secretary Scott Bessent, held with interpreters in a room at the Washington headquarters of the International Monetary Fund (IMF), lasted for about 50 minutes. At the meeting, they reportedly hurried through the preliminary greetings and small talk to begin the substantive discussion.

Bessent said that a stronger yen against the dollar is desirable, repeating what Trump has asserted before.

Although there was no reference to any specific exchange rate target, the meeting was seen as Washington stressing to Japan its strong discontent with the current levels of the strong dollar against the yen.

At a press conference following the meeting, Kato said, “There was no discussion of a target for exchange rate levels.” But he did not say much about the specific demands the U.S. side made.

The U.S. side has been focused on the issue of reducing the huge U.S. trade deficit with Japan and regards the weakness of the yen against the dollar as a problem, as it puts U.S. exports at a trade disadvantage.

On Wednesday, the day before the Japan-U.S. finance ministerial meeting, Trump said Japan is always pursuing a weak yen, thus strongly holding the Japanese side in check.

Council of Economic Advisers Chair Stephen Miran, who is considered Trump’s economic brain, referred to an envisioned “Mar-a-Lago Accord,” a scheme in which countries would cooperate in weakening the dollar, in a paper published last November.

Triple weaknesses

Before the meeting, there was widespread wariness in the market that Bessent would coercively pressure Japan to correct the exchange-rate levels or urge the Bank of Japan to raise the interest rate.

The fact that such fears were not realized could be attributed to the U.S. side wishing to avoid triggering any rapid fluctuations in the financial markets.

Since the Trump administration invoked its “reciprocal tariffs,” the U.S. financial markets have experienced several instances of “triple weakness,” in which stocks, Treasury bonds and the dollar declined simultaneously.

If Washington were to strongly pressure Japan to strengthen the yen against the dollar, it could reignite economic fears and lead to another spell of triple weakness, including for the dollar. Such a scenario could accelerate inflation in the United States and could even deal a blow to the U.S. economy as a whole.

Bessent, who once worked for George Soros’ investment fund and was involved in the “Black Wednesday,” in which the British currency plummeted in 1992, is said to be a market expert.

According to The New York Times, Bessent also played a key role in bringing about a 90-day suspension of the imposition of Trump’s additional “reciprocal tariffs.”

Since Bessent is well-versed in the possible impact of currency and bond market fluctuations on business activities and the real economy, he is reckoned to have prioritized market considerations in the latest meeting.

However, no optimism is warranted regarding Japan-U.S. negotiations in the days ahead. Economic revitalization minister Ryosei Akazawa will visit the United States for the second round of tariff talks, slated to start next Wednesday.

The risk cannot be ruled out that the U.S. side will reinforce its hardline stance on the exchange rate as part of the “deals.”

Tsuyoshi Ueno of NLI Research Institute commented: “We cannot take an optimistic view just because Japan got through the meeting this time. The United States has not changed its thinking that Japan has non-tariff barriers, and in case the bilateral talks have rough going, there is a possibility that the U.S. side will bring up the exchange rate issue for discussion.”

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Correction

The part of the above article that reads, “Bessent said that a stronger yen against the dollar is desirable, repeating what Trump has asserted before,” is incorrect. (July 2)