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ECONOMY > Economic Policy

Japan’s Forex policy will not change with the next U.S. president

  • November 24, 2016
  • , Nikkei , p. 3
  • JMH Translation

With markets expecting a change in the U.S. economic policy under the incoming Trump administration, the dollar has been rapidly appreciating in the international currency market. Nikkei Shimbun asked MOF Vice-Minister of Finance for International Affairs Masatsugu Asakawa about Japan’s foreign exchange policy in coming years.


Q: What is your opinion about the next U.S. administration under Trump?


A: I travelled to the U.S. in mid-November to meet as many relevant personnel as possible in the Trump camp. Republicans have a long experience in the White House in the past, and the people I met were all respectable. We can hold constructive and intelligent discussions.


Q: As we speak, the U.S. dollar is getting stronger by the day.


A: The rise in interest rates and the appreciation of the dollar are the result of the Trump campaign that emphasized growth-friendly policies including tax reduction, financial deregulation and public spending increase. Some worry that he will issue more Treasury bonds to finance the public works and to compensate the loss in the tax revenue. If the markets start to worry about a further issue of bonds, a situation may arise in which a rise in interest does not result in a rise of the dollar. We will see the market reaction more clearly once a new economic policy framework takes shape.


Q: What is your understanding of Trump’s currency policy?


A: Judging from his comments I have heard, Trump seems to embrace what’s good about the dollar’s appreciation and what’s not good about it. I cannot speculate on his administration’s currency policy. His monetary policy is also unclear. We cannot tell if he intends to pursue a low interest rate, or if he prefers to raise it.


Q: Will Japan’s foreign exchange policy change after the new administration takes over in the U.S.?


A: No. We are formulating our foreign exchange policy according to the G7 agreements (based on a belief that a rapid currency fluctuation has adverse effects on the international economy). We will need to talk about that with the new U.S. administration as well. Japan’s exchange policy is not going to be affected by Trump’s inauguration as president.


Although Trump used to talk about Japan and China in the same breath, recently he has not mentioned Japan. At the moment, China is confronted with a capital flight and conducting currency interventions to sell dollars. In general, the U.S. is sensitive to other countries’ dollar-purchase interventions. We don’t know if, in their mind, the sales of dollars for supporting home-currency value also constitute a currency intervention.


Q: Will the role of the G7 change with the Trump administration?


A: I don’t think the inauguration of Trump as U.S. president is going to undermine all multilateral frameworks. G7 and G20 have different roles to play, and they are the fruits of our hard work and efforts over a long period of time. I don’t think he will dismiss them. However, I think he is skeptical about multilateralism.

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