U.S. President Donald Trump has singled out Japan and criticized it for manipulating the foreign exchange rate to devalue the yen. He is falsely accusing other countries for the strong dollar.
Trump has been claiming that other countries’ manipulation to devalue their currencies is hurting the U.S., so his criticism of Japan was expected, in a way. However, we are appalled and disappointed by his unabashed expression of unreasonable criticism.
Prime Minister Shinzo Abe was right to refute him and say that “the criticism is off the mark.”
The fact that Trump took up this issue could also be perceived as the U.S.’s blatant manipulation to devalue the dollar. This cannot be overlooked even if he was engaging in verbal intervention without a proper understanding of foreign exchange.
Trump has adopted a strategy of strictly inhibiting manipulation for currency devaluation through bilateral trade agreements. He may put pressure on Japan’s policies based on his misconception.
Abe should state explicitly at the Japan-U.S. summit on Feb. 10 that Japan will not meet unreasonable demands.
The strong dollar at present is the result of the interest gap caused by the U.S.’s raising its interest rates while Japan and Europe continue their monetary easing policies. It must also be noted that the current dollar-buying is based on expectations relating to the Trump administration’s infrastructure investment and tax cut policies. It is absurd to turn a blind eye to these facts and simply blame other countries.
Trump claimed that other countries “take advantage of the U.S. with their money and their money supply and devaluation.” This remark probably had the Bank of Japan’s (BOJ) quantitative easing and other monetary policies in mind.
Monetary easing under the Abe administration has resulted in a weaker yen, and this could also be regarded as an achievement of Abenomics. Even the U.S. had implemented massive monetary easing after the Lehman Shock. We must not lose sight of the BOJ’s role in ending deflation and tie its hands on account of foreign exchange fluctuations.
Japan has not engaged in any market intervention since its yen-selling and dollar-buying operations after the Great East Japan Earthquake to stem yen appreciation. It is awful that Japan is being clumped together with China, which is manipulating exchange rates constantly.
If the dollar is so strong that it has deviated from the economic reality and is having an adverse influence on the economy, this should be dealt with through international coordination under such multilateral frameworks as the G7.
Arbitrary intervention with the exchange rate through bilateral negotiations without taking such a step will only give rise to chaos in the market.