Japan-U.S. finance chiefs’ meeting: Currency Target Avoided for the Time Being

Editorial

15:20 JST, April 26, 2025

The Japan-U.S. Finance Ministerial Meeting took place amid U.S. President Donald Trump’s concerns that the weak yen and strong dollar is problematic. The United States did not demand a specific currency target, but there is no cause for optimism.

Japan should continue to exhort that setting exchange rate targets is very harmful to mutual development.

During his visit to the United States for international conferences, Finance Minister Katsunobu Kato on Thursday met with U.S. Treasury Secretary Scott Bessent. At a press conference following the meeting, Kato said, “There was no discussion at all regarding exchange rate levels or targets, or frameworks for managing exchange rates.”

The two reaffirmed that exchange rates are determined by the market and that excessive fluctuations or disorderly movements negatively impact economic and financial stability. They also agreed to continue close consultations.

During Japan-U.S. tariff negotiations, Trump has repeatedly criticized Japan, believing it employs a policy of weakening its currency, which is advantageous for its exports.

The reason that the U.S. side did not mention currency targets at this meeting may be due to turmoil in the financial markets, namely the triple sell-off of the dollar, stocks and bonds, which was caused by Trump’s remarks among other factors.

It can be said that the meeting resulted in a moderate outcome for the time being, but the Japanese government needs to remain vigilant going forward.

This is because it has been said that the Trump administration is harboring a plan to significantly rewrite the current international financial order, which is centered on the dollar as the key currency.

The idea is reportedly based on a paper published by Stephen Miran, chair of Trump’s Council of Economic Advisers, before assuming the post.

The paper notes as a problem that the system of the dollar as the key currency leads to a constant appreciation of the dollar, which is disadvantageous to exports, causing the manufacturing industry to decline and increasing the trade deficit.

As part of a solution, the paper calls on countries to coordinate on weakening the dollar and advocates that they sign the Mar-a-Lago Accord, named after Trump’s residence.

In light of this plan, it is possible that the United States will seek currency targets in the future, depending on how negotiations unfold.

However, there is a strong concern that exchange rate targets would harm economic stability. An attempt to correct the weak yen could cause it to appreciate beyond expectations and worsen the earnings of exporting companies. There is also a risk that pressure on the Bank of Japan to raise interest rates could intensify, threatening the independence of its monetary policy.

For the United States as well, if confidence in the dollar wavers, it would cause significant turmoil in its financial markets and inflict severe damage on its economy. It will be important for Japan and the United States to share a common understanding of these issues.

To reduce the U.S. trade deficit, it is desirable for Japan to increase its purchases of U.S. energy and food products and to increase investment in the United States. This is a path that brings mutual benefits to Japan and the United States.

(From The Yomiuri Shimbun, April 26, 2025)