Japan Unlikely to Face U.S. Pressure on Yen Despite Trump’s Trade Criticism

Japan is unlikely to face U.S. pressure to strengthen the yen, despite President Donald Trump’s renewed criticism of the trade imbalance, according to Masatsugu Asakawa, former top currency diplomat and ex-ADB President. Asakawa, now head of the Institute for International Monetary Affairs, told Reuters that currency policy remains in the hands of finance ministers, with no active discussions on yen-dollar adjustments between U.S. Treasury Secretary Scott Bessent and Japan’s Finance Minister Katsunobu Kato.

Trump’s calls for “reciprocal” tariffs and remarks suggesting Japan keeps the yen weak have stirred speculation, but Asakawa dismissed the likelihood of a coordinated dollar weakening similar to the 1985 Plaza Accord, noting such an agreement would now require China and Europe’s cooperation.

The dollar has fallen 7.5% against the yen this year, and the dollar index is down 11%—its worst first-half performance since 1973. A weaker dollar may boost U.S. inflation, a risk likely on Bessent’s radar, Asakawa added.

During Trump’s first term, then-Prime Minister Shinzo Abe convinced the U.S. to leave exchange-rate matters to finance chiefs—a practice Asakawa believes still guides current policy. In April, Bessent and Kato agreed to maintain “constructive” currency dialogue but avoided setting targets or controls on yen movement.

As Trump ramps up trade pressure—planning to raise tariffs on Japanese goods to 25% from August 1—Asakawa said Japan still holds leverage. Key negotiating tools include promises of increased U.S. investment, aligning car safety standards, and participating in LNG projects in Alaska. He advised presenting these as a unified trade package.

Asakawa, who played a key role in Japan-U.S. trade talks from 2015 to 2019, stressed that while Trump’s rhetoric is aggressive, major currency shifts remain unlikely.