No Talk on Currency between Ministers

Minister of Finance, Katsunobu Kato, had a meeting with U.S. Secretary of Treasury, Scott Bessent, on the sideline of spring meeting of International Monetary Fund and the World Bank in Washington., D.C. on April 24th. Despite speculations befre meeting that Bessent would push Kato to set a currency target, both financial chiefs denied that they had talked that issue. However, the government of Japan is still careful about U.S. President Donald Trump’s frustration on Japan’s currency policy. 

In the 50-minute meeting, Kato explained situation of Japanese economy in which wage hike or price inflation was main topic. “There was no conversation about target of the level of foreign exchange or the framework of controlling on that,” said Kato in his press conference after the meeting with Bessent.

 

Kato denied discussion on adjustment of strong U.S. dollar. “Exchange rate is determined in the market, and we reconfirmed that extreme fluctuation gives negative impacts,” said Kato, indicating that their discussion was limited to general arguments. They concurred that both governments continue their close and constructive consultation on currency, in the context of negotiation on tariffs.

 

Although there were some predictions that the U.S. side would require the Bank of Japan (BOJ) to raise interest rate, Bessent did not ask about the policy of the BOJ. Yomiuri Shimbun reported that Bessent had told Kato that he would hope depreciation of dollar and appreciation of yen. Vice-minister of Finance for International Affairs, Atsushi Mimura, dismissed that news report.

 

President Trump has been criticizing Japan’s currency policy. In his first term as the U.S. President, Trump required to include “currency clause,” which intended to disrupt intensive competition seeking low currency value, in Japan-U.S. Trade Agreement. Trump said that Japan and China would not be able to keep reducing values of their currencies in March. He reiterated the same criticism on the day before the meeting between Kato and Bessent. Japan is on the monitoring list of countries on currency manipulation of the U.S. Department of Treasury.

 

It is supposed that current trend in the market affected attitude of U.S. leaders. Since Trump announced “reciprocal” tariffs in early April, markets responded with significant amount of selling U.S. bonds, dollar and stocks. Trump, who hopes to keep the status of dollar as the base currency in the world, is supposed to be annoyed with negative situation in the market.

 

Trump is in a position that he needs to wrap up the negotiation over tariffs with Japan as before the end of 90-days moratorium which will expire in early July, because concluding a deal with Japan may assure his capability as an international negotiator. “I’m getting along very well with Japan. We’re very close to a deal,” said Trump. But conversation with the market means a lot for him as well as negotiation with Japan.

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